CORPORATE FINANCE

EXAM QUESTION

If Mr Elon Musk fully utilized the

margin loan facility of USD 12.5 billion
for the acquisition of Twitter, would
there be a margin call?
Project X
Margin Loan Facility
COMMITMENTS

Facility Pro Rata

Initial Lender Commitment (USD) Portion (%)
Morgan Stanley Senior Funding, Inc. 2,000,000,000 16.0
Bank of America, N.A. 1,500,000,000 12.0
Barclays Bank plc 1,500,000,000 12.0
MUFG Bank, Ltd. 1,500,000,000 12.0
Credit Suisse AG, Cayman Islands Branch 1,250,000,000 10.0
BNP Paribas 750,000,000 6.0
Citibank, N.A. 750,000,000 6.0
Deutsche Bank AG, London Branch 750,000,000 6.0
Mizuho Bank, Ltd. 750,000,000 6.0
Royal Bank of Canada 750,000,000 6.0
Société Générale 600,000,000 4.8
Canadian Imperial Bank of Commerce 400,000,000 3.2
Total: 12,500,000,000 100

Summary of Principal Terms and Conditions

GENERAL TERMS:
Borrower X Holdings III, LLC 1
Guarantor Principal (Full and Unconditional Guarantee)
Lead Arranger Morgan Stanley Bank, N.A.
Administrative Agent Morgan Stanley Senior Funding, Inc.
Lenders A syndicate of lending banks to be determined (other than disqualified lenders)
Custodian Morgan Stanley & Co. LLC
Calculation Agent and Morgan Stanley & Co. LLC
Collateral Agent
Funding Date Any time during the Availability Period upon 3 Business Days’ notice
The Market Reference Price used to determine the Number of Shares required to
satisfy the Maximum Initial LTV Level will be determined as of the second Business
Day prior to the Funding Date.
Loan Amount USD 12,500,000,000 across Lenders, provided that the LTV Ratio on the Funding
Date does not exceed the Maximum Initial LTV Level. The Loan Amount will be
funded in a term loan on the Funding Date.
The Loan Amount may be decreased at the election of the Borrower as set forth in the
Commitment Letter referred to below.
Loan Currency USD
Maturity Date 3 years from the Funding Date
Shares Ordinary shares of Tesla, Inc. (Bloomberg Ticker: TSLA US Equity) (the “Issuer”)
Collateral Account Shares in an amount equal to the Number of Shares are deposited in a collateral
account (with separate sub-accounts for each Lender) pledged to the Lenders at
Custodian in DTC form and free of any lock-up or selling restrictions other than any
restrictions arising as a matter of law (the “Collateral Shares”)
Collateral Agent to control Collateral Account on behalf of Lenders, and each Lender
to have a security interest in the Shares held in or credited to the sub-account of
Collateral Account of such Lender (which shall be a pro rata portion of the Collateral
Shares)
No rehypothecation or borrow rights by Custodian or Lenders

Number of Shares [ ]2 Shares

Exchange Nasdaq Global Select Market
Use of Proceeds To pay a portion of the purchase price to acquire the target company and the fees and
expenses incurred in connection with this financing and the other financings for the
acquisition of the target company

FINANCING TERMS:
Interest Rate Base Rate plus Spread on the outstanding Loan Amount
Base Rate The higher of (i) 3-month Term SOFR and (ii) zero
Spread 3.00%

1
The Borrower will be a bankruptcy-remote newly-formed limited liability company incorporated in the state of
Delaware. See “Borrower Organization Documents” below.
2
To be determined based on the Market Reference Price on the second Business Day prior to Funding Date.

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Interest Payment Quarterly following the Funding Date to be paid in cash or PIK at the borrower’s election.
Dates To the extent that PIK is elected, the interest amount shall be added to the Loan Amount
Facility 5% per annum, paid on the outstanding Loan Amount on each relevant date
Amortization
Amount
Upfront Fee 0.5% of the Loan Amount payable on the Funding Date pro rata to each of the Lenders

COLLATERAL TERMS:
LTV Ratio Net Obligations divided by the Aggregate Collateral Share Value
Net Obligations Loan Amount plus accrued and unpaid interest minus the amount of Cash Collateral
minus the cash value of any Shares sold pursuant to a Permitted Sale Transaction that
remain in the Collateral Account pending settlement
Aggregate Collateral The Market Reference Price multiplied by the number of Collateral Shares (excluding
Share Value any Collateral Shares sold pursuant to a Permitted Sale Transaction that remain in the
Collateral Account pending settlement)
Market Reference The official closing price of the Shares on the Exchange on any day multiplied by the
Price Disrupted Day Haircut
Disrupted Day Haircut In the event there are 3 or more consecutive scheduled trading days for the Shares
that are Disrupted Days (to be defined), (i) 100% less (ii)(a) 5% multiplied by (b) (x)
the number of consecutive Disrupted Days minus (y) one.
Collateral Shortfall If on any day the LTV Ratio exceeds the LTV Margin Call Level, the Borrower shall,
within two Business Days, (i) transfer sufficient Additional Collateral to the
Collateral Account, (ii) prepay the Loan Amount and/or (iii) sell Collateral Shares
(with the proceeds of such sales to be deposited in the Collateral Account and/or
applied to prepay the Loan Amount) in order to bring the LTV Ratio to or below the
LTV Reset Level
Maximum Initial LTV 20%
Level
LTV Margin Call 35%
Level
LTV Reset Level 25%
LTV Release Level 15%
Additional Collateral USD Cash placed in the Collateral Account. No additional Shares may be pledged
after the Funding Date
Collateral Release If, on any day, the LTV Ratio has been lower than or equal to the LTV Release Level
for 5 consecutive scheduled trading days, the Borrower can require the Lender to
release, with two Business Days’ notice, Collateral Shares for purposes of settling
Permitted Sale Transactions or cash from the Collateral Account, provided that no
material default, Event of Default, Potential Adjustment Event, Mandatory
Prepayment Event or Collateral Shortfall shall have occurred and be continuing
immediately prior to, or immediately following, such release and that after such
release the LTV Ratio does not exceed the LTV Release Level.

REPAYMENT TERMS:
Loan On each annual anniversary of the Funding Date, Borrower shall pay the Facility Amortization
Repayment Amount

On the Maturity Date, Borrower shall repay any outstanding Loan Amount plus all accrued
and unpaid interest thereon and any other outstanding amounts owed

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Mandatory Typical for a transaction of such nature, including but not limited to:
Prepayment
Event ▪ Share Price Event: The VWAP of the Shares on the Exchange on any day is below 40% of its
official closing price on the Funding Date
▪ Completion of a Merger Event in respect of the Shares
▪ Change of Control of the Issuer
▪ Bankruptcy or Insolvency of the Issuer
▪ Delisting
▪ Nationalization of the Issuer
▪ Imposition of transfer restrictions on the Shares
 ▪ Disruption in trading of the Shares or Exchange closure for 5 consecutive scheduled trading
days
▪ Potential Adjustment Event for which Calculation Agent determines that no adjustment could
be made to produce a commercially reasonable result
▪ Change of Control of the Borrower
The Borrower shall repay the Loan Amount outstanding as well as all accrued and unpaid interest
thereon and any Make-Whole Amount after notice is given of a Mandatory Prepayment Event
Potential ▪ Stock split, reverse stock split, or stock dividend of the Shares
Adjustment Event ▪ Announcement of a Tender Offer, Merger Event, Delisting, Nationalization
▪ Completion of a Tender Offer in respect of the Shares
▪ The 30-day ADTV of the Shares falls below 10 MM shares
▪ Any other event that has a diluting effect on the value of the Shares
Voluntary Borrower may at any time prepay the loan in full or in part by providing 3 Business Days’ notice to
Prepayment the Lenders, in an amount equal to $10,000,000 or a whole multiple of $1,000,000 in excess thereof
In case of any prepayment the Borrower will pay (i) Loan Amount being prepaid; (ii) any unpaid
and accrued interest thereon; (iii) any Make-Whole Amount and (iv) if applicable, customary
breakage costs
Make-Whole For any prepayments of the Loan Amount made within 18 months of the Funding Date, excluding any
Amount Facility Amortization Amount Loan Repayment, an amount equal to (a) the Loan Amount so prepaid,
multiplied by (b) the number of calendar days between the relevant prepayment date and the date that
is 18 months after the Funding Date divided by 360, multiplied by (c) 50% of the Spread
Events of Default Typical for transaction of such nature and to be limited to the following (with customary thresholds,
exceptions and cure periods):

▪ Non-payment of Loan Amount (with no grace period)

▪ Non-payment of interest (with a 5-day grace period)
▪ Failure to cure a Collateral Shortfall
▪ Breach of covenants
▪ Breach of obligations
▪ Misrepresentation
▪ Invalidity, Unlawfulness and Repudiation
▪ Failure of Security
▪ Insolvency, Insolvency Proceedings or Insolvency Filing by the Borrower
▪ Cross-default to indebtedness of affiliates of Borrower (other than Issuer or its subsidiaries)
that is secured by Shares
▪ A judgment or order for the payment of money against Borrower
▪ Any government investigation against Borrower that would reasonably be expected to have a
Material Adverse Effect

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Consequences of During the continuance of an Event of Default, any Lender may (i) declare its pro
Events of Default rata share of the principal amount of the Loan, all accrued and unpaid interest
thereon, the Make-whole Amount (if any) with respect thereto and (ii) failing such
payment, exercise remedies against Borrower, including foreclosing on any and all
collateral then credited to its sub-account of the Collateral Account

OTHER TERMS:
Dividends Any distribution with respect to the Collateral Shares (ordinary or extraordinary, cash
or non-cash dividends or other distributions) to be received into the Collateral
Account, pledged to Lenders
Permitted Sale Borrower can sell Collateral Shares at any time subject to the following constraints:
Transaction
▪ Such sale is effected on an arm’s length basis
▪ The proceeds will be deposited to the Collateral Account or applied to prepay
the Lenders on a pro rata basis
▪ No Mandatory Prepayment Event, Potential Adjustment Event or Event of
Default exists or would immediately result therefrom
Security Structure New York law pledge over the Collateral Shares in the Collateral Account and all
proceeds thereon, including Dividends
Rehypothecation Not applicable
Rights
Voting of Shares Borrower may continue to exercise its voting rights in respect of the Collateral Shares
The Collateral Agent shall promptly, and in a timely manner, execute all proxies (or
other mechanism as agreed between the Lenders and Borrower) for the purpose of
enabling Borrower to exercise its voting rights in respect of the Collateral Shares

Assignment/Hedging Any Lender can assign, sub-participate or hedge at any time without prior consent
on terms customary for this type of financing; provided that any Lender assignment
shall be subject to a list of disqualified potential lenders.
Confidentiality Typical provisions for a transaction of this nature, including customary exceptions to
permit the Lenders to assign, sub-participate or hedge
Business Days New York
Governing Law New York
Documentation Margin Loan Agreement, Control Agreement, Security Agreement, Issuer
Agreement, Guarantee
Other Fees All taxes, duties, registration fees, legal fees, trustee or custodian fees, and
enforcement costs (if any) incurred by the Lenders in relation to the Loan shall be
reimbursed promptly by the Borrower when requested, subject to customary
limitations, including that all legal fees shall be reasonable and documented, and the
Lenders and the Administrative Agent shall only be entitled to the reimbursement of
the reasonable and documented fees of one primary firm of counsel
Conditions Precedent As set forth on Exhibit B to the Commitment Letter.
to Funding ▪
Issuer Agreement Issuer to represent to the Lenders and the Administrative Agent that, among other
things, the entry into the margin loan transaction and the pledge of the Collateral
Shares will not violate the Issuer trading and corporate policies, constitutional
documents or bylaws.
The Issuer to covenant to the Lenders that the Issuer will not change its Board
pledging policy applicable to directors and executive officers with respect to pledged
Shares prior to the Maturity Date.

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Borrower Typical for a transaction of such nature; to include the following concepts that will apply for so
Organization long as any Loan Amount remains outstanding:
Documents ▪ the Borrower will appoint an independent director reasonably satisfactory to the
Lenders
▪ any bankruptcy, insolvency, winding up, liquidation, reorganization or similar
proceedings or events with respect to the Borrower will require an affirmative vote of
the independent director
▪ customary limited purpose provisions
▪ customary separateness provisions
 ▪ other provisions related to the foregoing for the continued ownership, existence and
governance of the Borrower and otherwise to effectuate such provisions
▪ prohibitions on certain amendments of the Organizational Documents without
Administrative Agent consent (not to be unreasonably withheld or delayed)

Information Including, but not limited to the following (and subject to customary exceptions and
Covenants qualifications to be agreed): unaudited annual balance sheet and unaudited statement of profit
and loss of the Borrower; notices of any material events; no provision of material non-public
information concerning the Issuer; compliance with Exchange Act requirements; notification of
default; semi-annual certificates from the Borrower with respect to no continuing Event of
Default and compliance with the Prohibition on Other Financings provision; all reasonable KYC
due diligence requirements; and provision of information, documentation and consents required
to facilitate hedging transactions and foreclosure upon enforcement
Other Including, but not limited to the following (and subject to customary exceptions and
Covenants qualifications to be agreed): maintenance of procedures to ensure compliance with FCPA and
any applicable anti-corruption laws, OFAC and other laws with respect to sanctions;
maintenance of books and records; maintenance of existence; authorizations; compliance with
applicable laws and regulations (including ERISA); compliance with corporate policies of the
Issuer; payment of obligations and taxes; compliance with constituent documents and
observance of special purpose provisions; maintenance of at least one independent director;
further assurances on Collateral matters; no merger; no change of business; taxation; no financial
indebtedness nor liens on its property (with customary permitted liens); prohibition on other
financings (as described below); arm’s length transactions; no impairment of security;
maintenance of books and records; maintenance of existence; limitation on material amendments
to constituent documents; limitation on creation of subsidiaries; limitation on making restricted
payments; limitation on the making or holding of investments (other than Collateral); prohibition
on the use of proceeds in violation of any anti-corruption or sanctions laws; prohibition on acting
as an investment company; prohibition on violation of margin regulations; prohibition on
changing tax status; prohibitions on contributions to employee benefit plans
Prohibition on The Borrower shall not, and the Borrower shall procure that each of its affiliates (other than the
Other Issuer or any of its subsidiaries) shall not, directly or indirectly, grant, or suffer to exist, any lien
Financings on any Shares that do not constitute Collateral Shares to secure any obligation of the Borrower
or any of its affiliates, other than any such liens that were granted by affiliates of the Borrower
prior to the Countersign Effective Date (as defined below) and the re-financing of such
obligations secured by such liens in an amount not to exceed the amount so refinanced (plus
premiums, accrued interest, fees and expenses) (each, a “Permitted Refinancing”); provided that
any liens on Shares not constituting Collateral Shares securing obligations of affiliates of the
Borrower incurred on or after the Countersign Effective Date and prior to the Funding Date
(other than a Permitted Refinancing) that do not in the aggregate of all such obligations exceed
$150 million in principal amount shall be excluded from the foregoing restriction.

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LENDER COMMITMENTS
Commitment Letter Each Lender will execute the commitment letter to which this Summary of
Principal Terms and Conditions is attached (the “Commitment Letter”) confirming
the total principal amount of its respective commitment to fund the margin loan
on the Funding Date, subject to satisfaction of the conditions precedent set forth
on Exhibit B to the Commitment Letter. Each Lender’s funding commitment will
be effective as of the Lender Effective Date.
Commencing on the Lender Effective Date, the Lenders’ commitments will
remain available during the Commitment Effective Period. No upfront availability
fee will be paid to the Lenders at the time the Lenders sign the Commitment Letter
or during the Commitment Effective Period. If the Borrower has not
countersigned the Commitment Letter before Countersign Expiration Time, each
Lender’s respective commitment will expire. If the Borrower countersigns the
Commitment Letter during the Commitment Effective Period, the Borrower’s
obligations to pay the fees contemplated thereunder to be paid on the Countersign
Effective Date will become effective.
Countersign Effective The date upon which the Borrower signs the Commitment Letter
Date

Commitment Effective The two-week period commencing on the Lender Effective Date and, unless the
Period Borrower signs the Commitment Letter prior to the Countersign Expiration Time,
ending at the Countersign Expiration Time .

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End of Exam Question