Krystal Hu and Anirban Sin

(Reuters.) It’s the most significant acquisition financing that has ever been offered for one person. Elon Musk has his own method.

Musk’s $46.5 billion funding package, which he unveiled Thursday to support his bid for the presidency, has more than two-thirds. Twitter Inc (NYSE:) The funds would be drawn from his personal assets and the rest from the bank loans that were secured against the assets of the social media platform.

It is actually the opposite of how many investors structure buyouts. The bulk of financing is secured against debt rather than the assets of the target business.

People familiar with the situation said that Musk’s banks refused to lend more money against Twitter because they felt the company, which is based in San Francisco, did not generate enough cash flow. The sources said some banks worried about being reprimanded by financial regulators if it took on additional risk.

Musk will see a decrease in his returns due to the fact that debt can be secured against acquired companies, which could greatly increase profits.

Twitter would need to increase its value by 1.4 fold to match the $33.5 million Musk has contributed from his fortune. Twitter’s equity would be only 1/3 of what he contributed to the deal. This money could only double if Twitter’s value was only 0.7x.

Musk is also willing to accept a risky $12.5B margin loan secured against Tesla Inc (NASDAQ:) Inc., his electric-car manufacturer, in order to help pay the $33.5B equity check. According to a regulatory filing, Musk would be required to repay this loan if Tesla stock falls by 40%.

Musk claimed last week that the economics of the deal were not important to him and that he pursued the acquisition “extremely essential for the future” of civilization.

Eric Talley from Columbia Law School stated that Musk’s financing was consistent with what he had said. The proposed structure of the deal would be difficult for private equity firms to become Musk’s equity partners. This is because they rely heavily on debt-funded saddling companies to increase returns.

Musk has not responded to my request for comment.

Forbes rates Musk as the richest man in the world, at $270 billion. But most of his wealth has been held in Tesla shares. The proposed deal structure would reduce his availability of liquidity.

According to regulatory filings, he had borrowed $88 billion for Tesla stock. The proposed acquisition financing of Twitter would increase that amount to over $150 billion. This means that he would not be able to obtain more cash from Tesla shares. Tesla executives cannot borrow more than 25% the stock’s value.

Musk can borrow against Tesla stock in order to fund his Twitter bid. However, this loan could cost him around $1 billion per year in interest and amortization costs, according to a regulatory filing. He is motivated to refinance this debt package immediately.

Musk did not disclose how much cash he had committed to the deal, or whether it was available immediately. He also didn’t say if he could cash out some assets. These include shares in SpaceX, a rocket manufacturer, and Boring Co.

According to sources familiar with the matter, the board of Twitter will ask Musk for more information about the source of the money he promised to deliver.

Twitter did not respond to our request for comment.

EQUITY PARTNERS

One source said that Musk was looking for partners in order to lower his equity share. Although it seems unlikely, such a partner may emerge.

SoftBank Group Corp is one of the largest technology investors in the world. It places large bets on companies, often using very little debt. However, the Japanese conglomerate has made a decision not to pursue Twitter. SoftBank spokespeople declined to comment.

According to the New York Post, Thoma Bravo LP is a private equity group that managed more than $100 billion of assets as of the end December. It has been in contact with Musk regarding joining his bid. According to a person who was familiar with this matter, Thoma Brave had stated to Twitter that it was investigating a rival bid for Musk’s challenge, but not joining him. Thoma Bravo declined to comment.

Musk also suggested that Twitter might move away from advertising. This prospect has given some pause for private equity firms considering that Twitter depends on advertising for most of its revenues.

Musk had tweeted earlier this month that Musk wanted to increase subscription revenue for the company and less rely on advertising because Twitter relies on advertising to sustain its existence. Later, he deleted the tweet.

Sources have confirmed that Twitter’s Board is set to reject Musk’s offer as it is too low before April 28th, when Musk is due to announce first quarter earnings.

Musk has a more than 9 percent stake in Twitter and said Wednesday that he is exploring options to offer a tender for the opportunity to take the bid direct to Twitter shareholders. Due to the poison pill Twitter has adopted, shares would not be sold, but shareholders could register support for Musk’s bid.