Twitter is starting to pay interest on its massive debt

Stock photo of Elon Musk and Twitter logo

Twitter has made its first interest payment on its more than $12.5 billion in looming debt, according to reports from Bloomberg and Financial Times. Elon Musk took out billions of dollars in loans back in October 2022, as part of the billionaire’s successful push to buy Twitter and take the social media platform private. And through that $44 billion acquisition deal, nearly $13 billion in debt became Twitter’s responsibility.

The first interest payment, due and presumably paid on Friday, probably cost the company an estimated $300 million, according to Bloomberg. Twitter reportedly paid this amount to seven banks, led by Morgan Stanley, which initially provided the acquisition funds.

The company making its first interest payment on time is a good sign, or rather, it is better than the alternative. But this first $300 million doesn’t come close to solving the huge sum owed. In accordance earlier Bloomberg calculations, Twitter will have to pay down about $1 billion in debt each year to keep up. Annual interest alone could top $1.2 billion, Bloomberg reported Monday. In contrast, before Musk, the company paid somewhere around $100 million in annual interest.

Still, even before Musk’s takeover, Twitter was struggling financially. The company only had a profitable year (2019) in its near decade as a public company. And under the leadership of the world’s second-richest man, Twitter’s finances have seemed even less sustainable. The company has lost a large part of ad revenue as advertisers continue to be intimidated by Musk’s “free speech” principles in action. Then there is obviously the debt.

Musk told employees in November that Twitter could go bankrupt.

In an apparent attempt to cope with these financial difficulties, the company has haven’t paid rent in at least three of its offices, including the headquarters in San Francisco, for several months. Twitter has also resorted to selling office furniture and other things goods at auction. The company has also laid off workers more than half of its employees in the last three months and cut benefits for those who remain.

Musk has claimed that the above measures are working. In a Twitter Spaces presentation in late December, the billionaire said the company was on track to “roughly” break even.

More recently though, the Twitter/Tesla/SpaceX boss has reportedly floated the idea sell 3 billion dollars of his Twitter shares to raise money – signaling that there could still be more turmoil ahead for the bird app.

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