Linda Yaccarino set to present new plan to long-suffering X bankers

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Linda Yaccarino is next week planning to meet the seven banks that helped bankroll Elon Musk’s takeover of X, formerly known as Twitter, to lay out her plans to revive the struggling social media company, said people briefed on the matter.

Yaccarino, who took over as chief executive in June, is set to meet bankers at Morgan Stanley, Bank of America, Barclays, MUFG, BNP Paribas, Mizuho and Société Générale on October 5.

The long-awaited meeting is a high-stakes opportunity for Yaccarino to convince X’s lenders that she has a plan to revive the social network by boosting the advertising revenue or even by moving into areas such as subscriptions and payments, the people said.

X declined to comment. The seven banks declined to comment.

“She has to get him out,” said a banker at one of X’s lenders, adding that lenders were unclear how she could win back advertisers if Musk continues to stoke tensions on the platform. “They need ad dollars to come back.”

The meeting comes days after Yaccarino on Wednesday appeared on stage at the Code Conference in a tense interview that has since drawn criticism. She fumbled questions on X’s user metrics while dodging others on safety, the platform’s business model, and her relationship with Musk.

However, Yacarrino said the company’s finances were improving: “From an operating cash flow perspective, we are just about break-even . . . It looks like in early 2024 we will be turning a profit.” Following the conference, X said it had 245mn daily active users.

The banks attending next week’s meeting have been stuck with roughly $13bn of debt tied to the acquisition for almost a year. They are nursing steep paper losses after the value of the paper collapsed just months after they agreed to fund Musk’s deal.

In mid-June, Musk and Yaccarino presented plans to equity investors to bring celebrities and political figures to the platform, and facilitate more commerce and payments between users. However, the meeting with the banks next week will be hosted by Yaccarino alone, said one person familiar with the situation.

US revenues for the platform have dropped 60 per cent since the takeover, Musk said in a tweet earlier this month. But the company is still generating sufficient earnings to cover X’s interest costs, which are roughly $1.5bn a year, said one person familiar with the matter.

In a recent interview with the Financial Times, Yaccarino said there was no longer a risk that X will run out of cash, adding: “We’re excited about the momentum here.” The company said 90 per cent of 2022’s top 100 spenders globally have now resumed spending.

However, it did not share details on the amount that returning advertisers are spending. Data from SensorTower suggests it is lower than before Musk’s acquisition.

Revenues at X, then known as Twitter, started to come under pressure before Musk finalised the purchase, in part because some blue-chip companies cut ad spending last year amid fears of a looming recession. However, some brands also pulled back as a result of Musk’s iconoclastic rhetoric as well as his decision to loosen the platform’s moderation policies.

The banks, led by Morgan Stanley, have been left in the uncomfortable position of holding the debt on their own balance sheets and are hoping the meeting with Yaccarino will yield a plan that could help them sell it on to other investors.

Late last year the banks received offers to buy some of the senior debt — which accounted for $6.7bn of the $12.7bn total — at just 65 cents on the dollar.

Had the banks agreed to the terms, they would have incurred aggregate losses far in excess of $1bn, an amount the banks have been unwilling to stomach.

Those losses would balloon further if the remaining debt, including $3bn of junior loans, was sold by the banks into the market.

But as X’s business deteriorated last year, even the hedge funds and credit investment firms that had once entertained buying the debt started 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 diligence materials that you can really use to get a good sense of the credit risk,” one large hedge fund that held discussions with X’s lenders told the FT last year.