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Linda Yaccarino plans to meet next week with the seven banks that helped finance Elon Musk’s acquisition of Plans for embattled social media companies.
Yacarino, who took over as CEO in June, will meet on Oct. 5 with bankers from Morgan Stanley, Bank of America, Barclays, MUFG, BNP Paribas, Mizuho and Societe Generale meet.
The long-awaited meeting represents a high-stakes opportunity for Yaccarino to convince X’s lenders that she plans to revive the company by increasing advertising revenue and even moving into areas like subscriptions and payments, people familiar with the matter said. social network.
X declined to comment. All seven banks declined to comment.
“She has to get him out,” said a banker at one of “They need the advertising dollars to come back.”
The meeting comes just days after Yacarino faced criticism after giving a tense interview on stage at Code Conference on Wednesday. She fumbled through some issues with X’s user metrics while sidestepping others on security, the platform’s business model and her relationship with Musk.
However, Yacarino said the company’s financial situation is improving: “From an operating cash flow perspective, we just broke even.” . It looks like we’ll be profitable in early 2024. ” After the meeting, X stated that its daily active users were 245 million.
Banks attending next week’s meeting have been saddled with about $13 billion in acquisition-related debt for nearly a year. Just months after they agreed to fund Musk’s deal, the company’s notes plummeted in value and they were taking huge losses on the notes.
In mid-June, Musk and Yacarino pitched plans to equity investors to bring celebrities and politicians to the platform and facilitate more commerce and payments among users. However, a person familiar with the matter said next week’s meeting with banks will be chaired solely by Yaccarino.
Musk said in a tweet earlier this month that the platform’s U.S. revenue had dropped 60% since the acquisition. But a person familiar with the matter said the company is still generating enough earnings to cover X’s interest costs, which is about $1.5 billion annually.
In a recent interview with the Financial Times, Yaccarino said X was no longer at risk of running out of cash, adding: “We’re excited about the momentum here.” 90% of consumers have now resumed consumption.
However, it did not disclose details of the amount spent by returning advertisers. That number is lower than it was before Musk’s acquisition, SensorTower data shows.
Even before Musk finally completed the acquisition, revenue at X (then known as Twitter) began to come under pressure, in part because some blue-chip companies cut advertising spending last year amid fears of a looming recession. However, some brands have also pulled out due to Musk’s iconoclastic rhetoric and his decision to loosen the platform’s moderation policies.
The banks, led by Morgan Stanley, have been in the awkward position of carrying the debt on their own balance sheets and hoped the meeting with Yaccarino would produce a plan to help them sell the debt to other investors.
Late last year, the bank received an offer to buy some of its senior debt – $6.7 billion of a total of $12.7 billion – for 65 cents on the dollar.
If the banks agreed to these terms, their total losses would be well over $1 billion, an amount the banks are unwilling to absorb.
Those losses would widen further if the bank sells remaining debt, including $3 billion in junior loans, to the market.
But as X’s business deteriorated last year, even hedge funds and credit investment firms that had been willing to buy the bonds began to balk at the idea.
“The problem with Twitter is that it’s almost impossible to underwrite, they don’t have a business plan, they don’t have a lot of stability or due diligence material that can really be used to get a good understanding of credit risk,” one large hedge fund told the Financial Times last year. The Fund has been in discussions with X’s lenders.
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