Krystal Hu, Anirban S

(Reuters.) Elon Musk revealed to banks that he had reached an agreement with them for funding his $44 billion purchase of Twitter Inc Three people who are familiar with the situation said that the CEO could reduce executive and board compensation at the social media firm in an effort to cut costs and develop new methods to monetize Twitters.

Sources say Musk pitched the lenders to obtain debt to finance the buyout, days after having submitted his April 14 offer via Twitter. The submission by Musk of his bank commitments, April 21, was crucial in Twitter’s acceptance of his “best and last” offer.

Musk needed to prove to banks that Twitter generated enough cash flow for him to pay off the loans he requested. He was able to secure $13 billion in Twitter loans and a $12.5 million margin loan linked to Tesla (NASDAQ:). The remainder of the consideration was paid by him.

Musk’s presentation to banks was his vision, not firm commitments. Sources said that Musk did not make any specific cost reductions once Twitter is owned. According to sources, Musk’s proposal was lacking in detail.

Musk tweeted that removing the salaries from Twitter’s board directors could lead to cost savings of $3 million. Twitter’s stock-based compensation was $630million for the twelve months ended Dec. 31, 2021, which is 33% more than 2020 corporate filings indicate.

Musk pointed out Twitter’s Gross Margin in his presentation to banks. This is significantly lower than the Meta Platform Inc’s Facebook or Pinterest (NYSE):). He argued that this gives the bank plenty of money to operate the business more economically.

Sources requested anonymity due to the confidential nature of the matter. Musk representatives declined to comment.

Bloomberg News had reported on Thursday that Musk explicitly mentioned job cuts in his pitch for banks. According to one source, Musk won’t make any decisions about job cuts until he takes over the business later in the year. Musk completed the purchase without knowing any confidential information about the financial performance of the company or the headcount.

Musk also told banks that he plans to create features to increase business revenue. Sources said Musk stated this to the banks.

He suggested that third-party websites should charge a fee if they want to embed or quote tweets from approved individuals and organizations.

Musk, in a tweet he later deleted, suggested that a number of modifications be made to Twitter Blue’s premium subscription service. These included lowering its cost, eliminating advertising, and giving the option to use the cryptocurrency dogecoin to pay. The premium Blue subscription to Twitter now costs $2.99 per month.

Musk also deleted a tweet in which he stated that he wanted to reduce Twitter’s dependency on advertising as a major source of revenue.

Forbes puts Musk’s net worth as $246 billion. He has also indicated that he would support banks marketing syndicated loans to investors and may then reveal details of his Twitter business plan, sources claimed.

One source said that Musk also has a candidate for chief executive of Twitter. However, they declined to identify the person.

FINANCIAL BANKS ARE TOO RISKY

According to sources, Tesla Inc’s chief executive told banks that he would seek moderation policies for the social media platform. These will be in accordance with the laws of every jurisdiction where Twitter is operated. This position was repeated by Musk publicly.

Twitter borrowed $13 billion to finance its 2022 earnings. This is seven times the projected income before interest, taxes and amortization. Sources said that this was too risky to allow banks to only participate in the margin loan.

According to sources, some banks also opted out because they were afraid Musk’s unpredictable behavior could lead to a exodus from Twitter of talented people, which would harm their business.

Twitter did not respond to our request for comment.