In all the brouhaha about the Twitter acquisition this piece of info had personally escaped me:
> Musk’s deal to buy Twitter included making the company take on $13 billion in debt from banks, which means Twitter will owe about $1 billion a year in interest payments
puts things in a slightly different perspective. I had somehow assumed that all the acquisition money had come in from Musk himself together with a bunch of other business "friends" or investment vehicles, didn't know there were direct bank loans involved.
There is not much difference. This is just one way to structure that. Basically, this is like a mortgage, where if Twitter goes bust, the bank takes a loss. But if Twitter just falls in value compared to the purchase price, the bank gets their money back. For Musk (and potential other owners), this means he doesn't have to offer any other collateral than Twitter for that loan.
I was mostly thinking on the recurring price of paying that debt, which, if I’m not mistaken, in cases like this one falls entirely on the acquired company (Twitter, in this case). This is irrespective of Twitter’s financial status, that money has to be paid on a recurrent manner.
That’s an extra cost on future Twitter of which I was not aware of, a cost entirely brought by this acquisition.
> Musk’s deal to buy Twitter included making the company take on $13 billion in debt from banks, which means Twitter will owe about $1 billion a year in interest payments
puts things in a slightly different perspective. I had somehow assumed that all the acquisition money had come in from Musk himself together with a bunch of other business "friends" or investment vehicles, didn't know there were direct bank loans involved.