S&P puts Twitter on watch

S&P said it placed all its Twitter Inc. ratings on CreditWatch with negative implications following the news the company accepted Elon Musk’s offer to buy the company and take it private.

“Elon Musk's proposed takeover of Twitter would cause leverage to spike significantly above the 1.5x downgrade threshold associated with the BB+ issuer credit rating. The proposed transaction includes $13 billion in new debt financing issued by the company and a $12.5 billion margin loan against $62.5 billion of Tesla Inc. shares. We plan to gather more information on the details of the margin loan, but it is possible that we will consolidate the loan in Twitter's capital structure and credit metrics,” the agency said in a press release.

Twitter has about $5.29 billion of unsecured debt. “Regardless of whether the margin loan is included in Twitter's credit metrics, the amount of debt in the capital structure will increase significantly and leverage will be well above our 1.5x leverage threshold for the current rating,” S&P said.

The agency said it sees a multiple-notch downgrade for the company leading to a rating probably no higher than a B.

S&P said it plans to resolve the CreditWatch once the deal closes and it can evaluate Twitter's capital structure, operating strategy and governance as a private entity.

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