Twitter Acquired by Musk Downgraded to 'B1' Credit Rating

Downgrade from Ba2 to B1 in 2 steps

(Photo by Bloomberg)

[Asia Economy Reporter Yujin Cho] On the 31st (local time), international credit rating agency Moody's downgraded the credit rating of Twitter, acquired by Elon Musk, CEO of Tesla, to B1.

Moody's announced that it had lowered Twitter's credit rating (CFR) and unsecured bond rating from Ba2 to B1 by two notches on the same day.

Moody's explained the reason for the downgrade, stating, "It is due to the increase in debt for acquisition financing and the decrease in cash balance," adding, "As a result, leverage is expected to increase and other credit metrics to weaken."

During Musk's acquisition process, Twitter took on a large amount of debt, significantly increasing interest expense burdens. Of the $44 billion acquisition funds, Twitter borrowed $13 billion from banks, resulting in an annual interest burden increase of over $1 billion going forward.

Moody's also pointed out governance risks and left open the possibility of further downgrades. Moody's stated, "Twitter's aggressive financial policies and the concentration of ownership solely in Musk are very negative," adding, "Further rating downgrades are also under consideration."

As of the end of the second quarter, Twitter has 238 million daily active users (DAU) worldwide. Twitter generated $5.1 billion in revenue last year, with approximately 89% coming from the advertising services sector.

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