If the squabbling ever stops over Elon Musk's , experts say he still faces a huge obstacle to closing the $44 billion deal: Keeping his financing in place.
Earlier this week, Musk reversed course and said he'd go through with acquiring the social media company under the same terms he agreed to in April. But after , there are scars and suspicions on both sides.
Experts say that behind the scenes, banks could be scrambling to find buyers for $12.5 billion in debt from the deal, and Musk is trying to hold together a group of equity investors that is pitching in billions more. is on the hook for the rest.
, when Musk's attorneys said Twitter is refusing to accept his . They sought to delay an upcoming trial on Twitter's lawsuit that could force him to complete the deal.
But Twitter's attorneys said it's Musk who is holding everything up, and his effort to put the trial on hold 鈥渋s an invitation to further mischief and delay."
In the end, a judge agreed to give Musk more time to close the deal but said the trial will go ahead in November if he doesn't.
It鈥檚 still possible the sale could close. But with so much at play, here's what could throw the deal off track, again:
BANK FINANCING
A group of banks, including Morgan Stanley and Bank of America, signed on to loan $12.5 billion of the money . In Thursday's court motion, Musk alleges that Twitter doesn't want to set the lawsuit aside because of a 鈥渂aseless鈥� fear that Musk could fail to get the bank financing.
鈥淣o such failure has occurred to date,鈥� the motion said. 鈥淐ounsel for the debt financing parties has advised that each of their clients is prepared to honor its obligations.鈥�
The banks are 鈥渆ssentially cemented鈥� to the deal by solid contracts, Wedbush analyst Dan Ives said. But the debt market has changed dramatically since April. The stock market has tumbled, , and interest rates are up as the .
Banks would sell the debt to institutional investors, but there's not much appetite now to take part in takeovers that saddle companies with big debts. Banks could be on the hook to make loans themselves.
鈥淭he banks would be really happy to not to have to take the risk of funding these loans," said Erik Gordon, a law and business professor at the University of Michigan. 鈥淭he agreements seem to be very strong, but I think the banks have their lawyers pulling all-nighters trying to get them out of it if they can.鈥�
EQUITY INVESTORS
Investors who would get equity in Twitter are supposed to kick in billions. Ives estimates they had agreed to $15 billion to $16 billion. But some investors may be skittish about staying in given the market changes and Musk鈥檚 repeated accusations against Twitter about the number of .
Qatar鈥檚 sovereign wealth fund declined comment this week on the $375 million its subsidiary pledged in May. Several other investors didn鈥檛 respond to requests for comment on whether they were still chipping in.
Musk鈥檚 equity commitments 鈥� including $1 billion from Musk鈥檚 friend and Oracle co-founder Larry Ellison 鈥� are on shakier ground if any in that diverse group of backers have changed their minds, said Kevin Kaiser, an adjunct finance professor at the University of Pennsylvania鈥檚 Wharton School.
鈥淣obody knows 鈥� I don鈥檛 know anyway 鈥� what their commitment is,鈥� Kaiser said. 鈥淪o are they able to back out? Because if they鈥檙e able to back out, he is on the hook.鈥�
MUSK MONEY
Musk, the world's richest person according to Forbes, has to kick in his own money, but just how much depends on how many equity investors stay in.
Most of his wealth is tied up in stock of the electric car company that he runs, Tesla Inc. Since April, he has , presumably to pay his share.
If any equity investors drop out, though, Musk will either have to replace them or throw in more money, fueling speculation that he might have to sell more Tesla shares. Musk's share of the original deal was about $15.5 billion, Ives estimated.
THE GUARANTEE
It's clear that Twitter's board is very suspect of Musk because he has trashed the company for months now, alleging that it has , said Gordon.
That has diminished Twitter's value and made investing in the deal less attractive, he says. And because Musk already tried to back out of the deal once, Twitter will want a guarantee of some sort that he won't back out again.
That, Ives said, is likely to be a large chunk of money held in a non-refundable escrow account that would go to Twitter if Musk doesn't deliver.
SIGNS OF PROGRESS
There are some signs that the deal will yet go through. Twitter says it looks forward to closing the deal by Oct. 28. Musk's deposition in the lawsuit, scheduled for Thursday in Austin, Texas, was postponed. Musk's motion says the bankers are still in. And the original group of investors is not talking publicly about bailing out.
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Krisher reported from Detroit, O'Brien from Providence, Rhode Island.
Tom Krisher And Matt O'brien, The Associated Press
