On October 5, Twitter/X C.E.O. Linda Yaccarino will reportedly meet with representatives of the seven banks that are still white-knuckling $13 billion of Twitter’s debt, in what is easily one of the most important Wall Street summits of the year. The value of this debt, after all, is wholly dependent on the likelihood that Elon Musk will be able to pay it back and make it money good, which he is currently doing by forking over quarterly interest payments totaling around $1.2 billion a year—so no small feat, even for the world’s richest man, when Twitter has lost users, lost advertising, hasn’t turned a profit since 2019 and prospects for turning it all around look dim, at best.
Even though the Twitter debt is senior, and mostly secured by Twitter’s assets, it has always been a risky piece of paper. At the time Elon took over, just before last Halloween, Twitter’s EBITDA was around $1 billion a year, making for an EBITDA/interest ratio of barely 1:1—not great by any standard. Then there was the fact that, at 13x EBITDA, Twitter’s debt load is gargantuan, even for a leveraged buyout. The saving grace, the banks must have thought when they committed to the deal in April 2022, was Elon himself, who was investing $24 billion of his own money, alongside the $7 billion that his friends (among them, Larry Ellison, Saudi Prince Al Waleed, the always self-assured Andreessen Horowitz, the Qataris, etcetera) were also investing in the Twitter equity. All together, of the insane $44 billion purchase price for Twitter, at least $31 billion, or 70 percent, was equity. That had to be comforting to the banks.
But that was before Elon took a sledgehammer to the company’s employees and its revenue, warned that Twitter might have to file for bankruptcy, unbanned bigots, and chased off advertisers. That $1 billion of EBITDA dissolved. Elon stopped paying landlords. He stopped paying for cloud services. He stopped paying the severance he owed his fired employees. (He did pay the banks the interest he owed them so far this year, by all counts.) He rebranded one of the best-known companies to “X” and swapped out the business model, eliminating verified accounts in lieu of a pay-for-play system that boosts posts from anyone willing to pay $8 a month. He’s thinking about charging everyone to use X, even though it has always previously been a free service.