Publicly, Elon Musk has said he doesn’t care about the economics of owning Twitter.
But during a hectic, multi-day scramble to line up $46.5 billion of funds to buy the social media platform, the world’s richest person shared enough of a vision with a dozen banks to persuade them to pull out their chequebooks.
Mr Musk’s plan for loading Twitter with more debt without tipping its credit rating into the deepest levels of junk was a crucial factor in getting the banks to bet on his bid, according to people familiar with the matter.
Since they’re being asked to back an unsolicited offer, where access to the target’s books is off limits, potential lenders weren’t able to do due diligence on Twitter beyond what’s in public filings. So, in deciding whether to offer up billions of dollars in financing over a matter of days, they mostly had to rely on Mr Musk’s plans.
His advisers presented the billionaire’s investment thesis to potential lenders during a call on Monday. Some of the lenders saw a slide presentation offering Mr Musk’s ideas around how Twitter’s business could be run, as well as its financial profile and how to boost revenue, said the people, who asked not to be identified as the details aren’t public.
Mr Musk’s enthusiasm for the deal was also emphasised and he appeared on Zoom calls with some of the top lenders where he appeared engaged, some of the people said.
While he has tweeted about plans to authenticate Twitter users and stop paying its board a salary, he’s not publicly outlined much about how he’d manage the company.
After weeks of questions over Mr Musk’s Twitter bid, things got more serious on Thursday as he revealed details of how a takeover would be financed.
The Tesla mogul lined up about $13bn in debt financing and a $12.5bn margin loan commitment from Morgan Stanley and 11 other banks, and pledged an additional $21bn through equity financing. Besides Morgan Stanley, other banks that appeared on both loans include MUFG Bank, Bank of America, Mizuho, BNP Paribas, Société Générale and Barclays.
Twitter has yet to respond to his proposal beyond saying it’s conducting a comprehensive review of the offer. The company has a quarterly conference call on Thursday and investors will be watching to see whether management addresses the bid.
When Mr Musk unveiled his $54.20-per-share offer for Twitter on April 14, he said Morgan Stanley was on board as his lead adviser. As well as being the first to offer to provide debt, the Wall Street giant led the process of getting other banks involved.
Lenders were approached on Saturday, and pulled all-nighters as they rushed to get the deal together over the Easter and Passover break and into this week, people familiar with the process said. Most of the banks signed commitment letters Wednesday, which also happened to be April 20 or 4/20 — a cannabis in-joke that Musk has often referenced. The details were made public the next day.
Morgan Stanley also co-ordinated calls between Mr Musk’s family office and other lenders as they wrapped their heads around the numbers, the people said. A representative for Morgan Stanley declined to comment. Mr Musk didn’t immediately respond to a request for comment via his family office.
The quick turnaround meant that not every lender was able to get the green light fast enough to participate in all the financing, with some only signing up for a $12.5bn margin loan to Mr Musk, secured in part by his Tesla holdings.
It’s highly unusual for a package comprising both debt and a margin loan to be assembled so quickly, some of the people said, with margin loans often taking about a week to come together.
If a deal goes ahead, the margin loan would be the largest tracked by the Bloomberg Billionaires Index, a ranking of the world’s richest people.
With markets becoming turbulent in recent months amid soaring inflation and the war in Ukraine, several banks have been burnt after underwriting aggressive, debt-fuelled deals that they later struggled to offload to risk-averse investors.
Twitter isn’t exactly the type of profit machine that lenders would finance with enormous amounts of debt. It’s already junk-rated, and cash flow in recent years has been choppy. Several market participants interviewed this week say the economics wouldn’t make much sense to most private equity investors.
Banks felt good about the deal because of Mr Musk’s vision but also because the Tesla chief executive was willing to commit such a large amount of equity. The equity portion is currently more than 40 per cent of the purchase price, but could be significantly higher, some of the people said.
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
UAE v Gibraltar
What: International friendly
When: 7pm kick off
Where: Rugby Park, Dubai Sports City
Admission: Free
Online: The match will be broadcast live on Dubai Exiles’ Facebook page
UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), Esekaia Dranibota (Harlequins), Matt Mills (Exiles), Jaen Botes (Exiles), Kristian Stinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), Emosi Vacanau (Harlequins), Niko Volavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), Thinus Steyn (Exiles)
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
TOURNAMENT INFO
Fixtures
Sunday January 5 - Oman v UAE
Monday January 6 - UAE v Namibia
Wednesday January 8 - Oman v Namibia
Thursday January 9 - Oman v UAE
Saturday January 11 - UAE v Namibia
Sunday January 12 – Oman v Namibia
UAE squad
Ahmed Raza (captain), Rohan Mustafa, Mohammed Usman, CP Rizwan, Waheed Ahmed, Zawar Farid, Darius D’Silva, Karthik Meiyappan, Jonathan Figy, Vriitya Aravind, Zahoor Khan, Junaid Siddique, Basil Hameed, Chirag Suri
Fixtures
Friday Leganes v Alaves, 10.15pm; Valencia v Las Palmas, 12.15am
Saturday Celta Vigo v Real Sociedad, 8.15pm; Girona v Atletico Madrid, 10.15pm; Sevilla v Espanyol, 12.15am
Sunday Athletic Bilbao v Getafe, 8.15am; Barcelona v Real Betis, 10.15pm; Deportivo v Real Madrid, 12.15am
Monday Levante v Villarreal, 10.15pm; Malaga v Eibar, midnight
Russia's Muslim Heartlands
Dominic Rubin, Oxford
Anghami
Started: December 2011
Co-founders: Elie Habib, Eddy Maroun
Based: Beirut and Dubai
Sector: Entertainment
Size: 85 employees
Stage: Series C
Investors: MEVP, du, Mobily, MBC, Samena Capital
The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
