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Comment by tlongo | Hacker News Reader

An absolutely non-finance-guy here.

Why does Twitter owe money to the banks, that was used to actually buy Twitter?

Anyone here who can explain this to me?

I would love to know the magic behind this. The next thing I will do is going to the Porsche dealer, finance a car and happily watch the monthly rate beeing paid from the dealer's account.

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Isn't it basically Musk borrowing money in Twitter's name to finance part of the deal?

Increases risk and exposure for the company, but not Musk personally.

You can, you can go to a bank and ask for a loan for an ice cream truck to start a business. It will help a lot if you already have money and just want to finance it.

They'll give the loan to a new company you create and that company will be responsible for paying it back.

A buyout is just an extension of that.

Buy a Porsche, rent it out on one of the luxury car rental apps, pay the monthly note with profit from the rentals.

Form a company, get a big loan, buy a bunch of luxury cars ... profit??

After you buy it, you don't just get to use it the way you want to all the time.

one simplified way to visualize this: create a corporate entity with the debt raised from investors (typically investment banks)--this entity will have a bunch of cash, the debt it owes for that cash, and no assets--and have that entity buy the target company. the cash gets sent to the old equity owners to relinquish their claim on the target company but the debt (and assets) stays with the merged company.

Because Twitter was bought by X Holdings. Which lend the money and is now in debt, but also owns Twitter. And Musk owns X Holdings.

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