syndication – Page 28

Elon Musk told bankers they wouldn’t lose any money on Twitter purchase

elon musk, Policy, syndication, Twitter, X / DJ Henderson / December 15, 2023

Value destruction —

Lenders unlikely to get even 60 cents on the dollar for the bonds and loans.

Joshua Franklin, Eric Platt, Ortenca Aliaj, and Hannah Murphy, FT – Dec 15, 2023 3: 06 pm UTC

Elon Musk privately told some of the bankers who lent him $13 billion to fund his leveraged buyout of Twitter that they would not lose any money on the deal, according to five people familiar with the matter.

The verbal guarantees were made by Musk to banks as a way to reassure the lenders as the value of the social media site, now rebranded as X, fell sharply after he completed the acquisition last year.

Despite the assurances, the seven banks that lent money to the billionaire for his buyout—Morgan Stanley, Bank of America, Barclays, MUFG, BNP Paribas, Mizuho and Société Générale—are facing serious losses on the debt if and when they eventually sell it.

The sources did not specify when Musk’s assurances were made, although one noted Musk had made them on several occasions. But the billionaire’s behavior, both in attempting to back out of the takeover in 2022 and more recently in alienating advertisers, has more broadly stymied the banks’ efforts to offload the debt since he engineered the takeover.

Large hedge funds and credit investors on Wall Street held conversations with the banks late last year, offering to buy the senior-most portion of the debt at roughly 65 cents on the dollar. But in recent interviews with the Financial Times, several said there was no price at which they would buy the bonds and loans, given their inability to gauge whether Linda Yaccarino, X’s chief executive, could turn the business around.

One multibillion-dollar firm that specializes in distressed debt called X’s debt “uninvestable.”

Selling the $12.5 billion of bonds and loans below 60 cents on the dollar—a price many investors believe the banks would be lucky to achieve in the current market—would imply losses before accounting for X’s interest payments of $4 billion or more, writedowns that have not yet been publicly reported by the syndicate of lenders, according to FT calculations. The debt is split between $6.5 billion of term loans, as well as $6 billion of senior and junior bonds and a $500 million revolver.

Morgan Stanley, Bank of America, Barclays, MUFG, BNP Paribas, Mizuho and Société Générale declined to comment. A spokesperson for X declined to comment. Musk did not return a request for comment.

The banks have held the debt on their balance sheets instead of selling at a steep loss in the hope that X’s performance will improve following a series of cost-cutting measures. Several people involved in the transaction noted that there was no plan to sell the debt imminently, with one saying there was no guarantee the banks would be able to offload the debt even in 2024.

The people involved in the deal cautioned that Musk’s guarantee was not based on any formal contract. One said they understood it as a boastful statement that the entrepreneur had never let his lenders down.

“I have never lost money for those who invest in me and I am not starting now,” he told Axios earlier this month, when asked about a separate fundraising push by his company X.ai Corp.

Some on Wall Street view Musk’s personal guarantees with skepticism, given that he tried to back out of his agreement to buy Twitter despite a watertight contract, before relenting.

Nevertheless, the guarantee from a man whose net worth Forbes pegs at about $243 billion has helped some of the bankers make the pitch to their internal committees that they can ascribe a higher price to the debt while they hold it on their balance sheets.

Morgan Stanley, the largest lender on the deal, in January disclosed $356 million in mark-to-market losses on corporate loans it planned to sell and loan hedges. Banks rarely report specific losses tied to an individual bond or loan, and often report write-downs of multiple deals together.

Wall Street was saddled with the Twitter buyout loan at the same time they were holding a smattering of other hung bridge loans—deals they were forced to fund themselves after failing to raise cash in public bond and loan markets. The FT has previously reported on large losses tied to other hung loans at the time, including the buyouts of technology company Citrix and television rating provider Nielsen.

How the debt has been marked on bank balance sheets has been an open question for traders and investors across Wall Street, given how much X’s business has deteriorated since Musk bought the company.

Musk, already out of favor with marketers for loosening content moderation, last month lost more advertisers after endorsing an antisemitic post. In November he followed by telling brands that were boycotting the business over his actions to “go fuck” themselves, criticizing Disney’s Bob Iger in particular.

According to a report last week from market intelligence firm Sensor Tower, in November 2023 total US ad spend among the top 100 advertisers on X was down nearly 45 percent compared with October 2022, prior to Musk’s takeover.

Elon Musk told bankers they wouldn’t lose any money on Twitter purchase Read More »

Why scientists are making transparent wood

Science, syndication, transparent displays / Mike M. / December 10, 2023

a potential sustainable material —

The material is being exploited for smartphone screens, insulated windows, and more.

Jude Coleman, Knowable Magazine – Dec 10, 2023 12: 15 pm UTC

a transparent piece of wood on top of a green leaf — Enlarge / See-through wood has a number of interesting properties that researchers hope to exploit.

Thirty years ago, a botanist in Germany had a simple wish: to see the inner workings of woody plants without dissecting them. By bleaching away the pigments in plant cells, Siegfried Fink managed to create transparent wood, and he published his technique in a niche wood technology journal. The 1992 paper remained the last word on see-through wood for more than a decade, until a researcher named Lars Berglund stumbled across it.

Berglund was inspired by Fink’s discovery, but not for botanical reasons. The materials scientist, who works at KTH Royal Institute of Technology in Sweden, specializes in polymer composites and was interested in creating a more robust alternative to transparent plastic. And he wasn’t the only one interested in wood’s virtues. Across the ocean, researchers at the University of Maryland were busy on a related goal: harnessing the strength of wood for nontraditional purposes.

Now, after years of experiments, the research of these groups is starting to bear fruit. Transparent wood could soon find uses in super-strong screens for smartphones; in soft, glowing light fixtures; and even as structural features, such as color-changing windows.

“I truly believe this material has a promising future,” says Qiliang Fu, a wood nanotechnologist at Nanjing Forestry University in China who worked in Berglund’s lab as a graduate student.

Wood is made up of countless little vertical channels, like a tight bundle of straws bound together with glue. These tube-shaped cells transport water and nutrients throughout a tree, and when the tree is harvested and the moisture evaporates, pockets of air are left behind. To create see-through wood, scientists first need to modify or get rid of the glue, called lignin, that holds the cell bundles together and provides trunks and branches with most of their earthy brown hues. After bleaching lignin’s color away or otherwise removing it, a milky-white skeleton of hollow cells remains.

This skeleton is still opaque, because the cell walls bend light to a different degree than the air in the cell pockets does—a value called a refractive index. Filling the air pockets with a substance like epoxy resin that bends light to a similar degree to the cell walls renders the wood transparent.

The material the scientists worked with is thin—typically less than a millimeter to around a centimeter thick. But the cells create a sturdy honeycomb structure, and the tiny wood fibers are stronger than the best carbon fibers, says materials scientist Liangbing Hu, who leads the research group working on transparent wood at the University of Maryland in College Park. And with the resin added, transparent wood outperforms plastic and glass: In tests measuring how easily materials fracture or break under pressure, transparent wood came out around three times stronger than transparent plastics like Plexiglass and about 10 times tougher than glass.

“The results are amazing, that a piece of wood can be as strong as glass,” says Hu, who highlighted the features of transparent wood in the 2023 Annual Review of Materials Research.

The process also works with thicker wood but the view through that substance is hazier because it scatters more light. In their original studies from 2016, Hu and Berglund both found that millimeter-thin sheets of the resin-filled wood skeletons let through 80 to 90 percent of light. As the thickness gets closer to a centimeter, light transmittance drops: Berglund’s group reported that 3.7-millimeter-thick wood—roughly two pennies thick—transmitted only 40 percent of light.

The slim profile and strength of the material means it could be a great alternative to products made from thin, easily shattered cuts of plastic or glass, such as display screens. The French company Woodoo, for example, uses a similar lignin-removing process in its wood screens, but leaves a bit of lignin to create a different color aesthetic. The company is tailoring its recyclable, touch-sensitive digital displays for products, including car dashboards and advertising billboards.

But most research has centered on transparent wood as an architectural feature, with windows a particularly promising use, says Prodyut Dhar, a biochemical engineer at the Indian Institute of Technology Varanasi. Transparent wood is a far better insulator than glass, so it could help buildings retain heat or keep it out. Hu and colleagues have also used polyvinyl alcohol, or PVA—a polymer used in glue and food packaging—to infiltrate the wood skeletons, making transparent wood that conducts heat at a rate five times lower than that of glass, the team reported in 2019 in Advanced Functional Materials.

Why scientists are making transparent wood Read More »

The quest to turn basalt dust into a viable climate solution

carbon capture, climate adaptation, climate adaptation strategies, Science, syndication / Shannon Garcia / December 9, 2023

Mary Yap has spent the last year and a half trying to get farmers to fall in love with basalt. The volcanic rock is chock full of nutrients, captured as its crystal structure forms from cooling magma, and can make soil less acidic. In that way it’s like limestone, which farmers often use to improve their soil. It’s a little more finicky to apply, and certainly less familiar. But basalt also comes with an important side benefit: It can naturally capture carbon from the atmosphere.

Yap’s pitch is part of a decades-long effort to scale up that natural weathering process and prove that it can lock carbon away for long enough to make a different to the climate. “The bottleneck is getting farmers to want to do this,” Yap says.

On Thursday, Yap’s young startup, Lithos Carbon, got a $57.1 million boost for its quest to turn basalt dust into a viable climate solution. It came from Frontier, a benefit corporation backed by a consortium of companies aiming to finance promising approaches to carbon dioxide removal, or CDR. Lithos says it will use the funds to soak up 154,000 tons of CO₂ by 2028, by sprinkling basalt dust on thousands of acres of US farmland. The average US car emits about 4 tons of CO₂each year.

The carbon removal purchase is the largest yet by Frontier, which was formed last year with nearly $1 billion from its tech-dominated members. Many of those companies, which include Meta, Alphabet, and payments processor Stripe, which owns Frontier, have made climate pledges that require not only reducing the emissions from their operations and supply chains but also “negative emissions”—sucking up carbon from the atmosphere to cancel out other emissions.

That accounting trick has been easier to prove out on paper than in practice. Many companies would have once turned to buying carbon offsets from activities like protecting forests that would otherwise be felled. But some have been trying to move away from those scandal-plagued and often short-lived approaches and into more durable techniques for carbon removal.

The current options for companies seeking negative emissions are limited. Frontier’s purchases are essentially down payments on ideas that are still in their infancy—generally too hard to verify or too expensive, or both, to attract a significant customer base. “What we’re trying to evaluate the field on is whether it’s on the trajectory to get to climate-relevant scale,” says Nan Ransohoff, who leads Frontier and also climate work at Stripe. The group starts with small “prepurchases” meant to help promising startups, and then moves on to “offtake” agreements for larger amounts of carbon that its members can count toward their emissions goals.

The Lithos purchase is one of those larger deals. It prices carbon removals at $370 per ton, about a quarter of which will pay for field monitoring and modeling to verify that carbon is being sequestered away from the atmosphere for the long term. Ransohoff says Frontier believes that Lithos is on a path to its goal of removing CO₂ for customers at a cost of less than $100 per ton, and at a rate of at least a half a billion tons per year.

“Most promising” approach

Lithos, founded in 2022, is developing a technology called enhanced rock weathering. It involves spreading a fine dust of basalt across fields before planting. As the rock further weathers from rainfall, it reacts with CO₂in the air. That forms bicarbonate, which locks away the carbon by combining it with hydrogen and oxygen atoms. Ultimately, the compound is washed into the ocean, where the carbon should stay put.

The strategy has the benefit of piggybacking on things that humans already do, Yap says. That’s in contrast with techniques like direct air capture, which involves building industrial plants that suck carbon out of the atmosphere. It’s easy to measure carbon removed that way—it’s all captured there onsite—but critics say it will be difficult to scale up because removing enough carbon to make a difference will require thousands of dedicate, resource-intensive facilities.

Using basalt dust to capture carbon should be more easily scaled up. There are plenty of fields to dump rock dust onto, and plenty of water for carbon to end up in. But the distributed nature of the process also makes measuring how much carbon was actually removed from the atmosphere more difficult.

The quest to turn basalt dust into a viable climate solution Read More »

EU agrees to landmark rules on artificial intelligence

AI, AI law, Biz & IT, European Union, syndication / Shannon Garcia / December 9, 2023

Get ready for some restrictions, Big Tech —

Legislation lays out restrictive regime for emerging technology.

Javier Espinoza, Financial Times – Dec 9, 2023 12: 09 am UTC

Enlarge / EU Commissioner Thierry Breton talks to media during a press conference in June.

Thierry Monasse | Getty Images

European Union lawmakers have agreed on the terms for landmark legislation to regulate artificial intelligence, pushing ahead with enacting the world’s most restrictive regime on the development of the technology.

Thierry Breton, EU commissioner, confirmed in a post on X that a deal had been reached.

He called it a historic agreement. “The EU becomes the very first continent to set clear rules for the use of AI,” he wrote. “The AIAct is much more than a rulebook—it’s a launchpad for EU start-ups and researchers to lead the global AI race.”

The deal followed years of discussions among member states and politicians on the ways AI should be curbed to have humanity’s interest at the heart of the legislation. It came after marathon discussions that started on Wednesday this week.

Members of the European Parliament have spent years arguing over their position before it was put forward to member states and the European Commission, the executive body of the EU. All three—countries, politicians, and the commission—must agree on the final text before it becomes law.

European companies have expressed their concern that overly restrictive rules on the technology, which is rapidly evolving and gained traction after the popularisation of OpenAI’s ChatGPT, will hamper innovation. Last June, dozens of some of the largest European companies, such as France’s Airbus and Germany’s Siemens, said the rules were looking too tough to nurture innovation and help local industries.

Last month, the UK hosted a summit on AI safety, leading to broad commitments from 28 nations to work together to tackle the existential risks stemming from advanced AI. That event attracted leading tech figures such as OpenAI’s Sam Altman, who has previously been critical of the EU’s plans to regulate the technology.

EU agrees to landmark rules on artificial intelligence Read More »