Banks taking a huge bath to promote extremely online Nazi edgelords
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The banks who financed the deal have been unable to sell the loans given to Elon Musk to allow him to massively overpay for Twitter, for obvious reasons:
The $13 billion that Elon Musk borrowed to buy Twitter has turned into the worst merger-finance deal for banks since the 2008-09 financial crisis.
The seven banks involved in the deal, including Morgan Stanley and Bank of America, lent the money to the billionaire’s holding company to take the social-media platform, now named X, private in October 2022. Banks that provide loans for takeovers generally sell the debt quickly to other investors to get it off their balance sheets, making money on fees.
The banks haven’t been able to offload the debt without incurring major losses—largely because of X’s weak financial performance—leaving the loans stuck on their balance sheets, or “hung” in industry jargon. The resulting write-downs have hobbled the banks’ loan books and, in one case, was a factor that crimped compensation for a bank’s merger department, according to people involved with the deal.
The value of the loans to Musk quickly soured after the $44 billion acquisition was completed. But new analysis shows how their persistent underperformance has put the deal in historic territory.
According to data from PitchBook LCD, the Twitter loans have been hung longer than every similar unsold deal since the 2008-09 financial crisis for which the research firm has complete records. There were many more hung deals back then, but banks in that period typically were still able to sell or write off most of their hung debt within roughly a year after they issued the loans. One hung deal—a $20 billion all-debt acquisition in 2007—was bigger than Twitter but wound up in bankruptcy about 12 months after banks wrote the check.
If the banking system had simply acted in its own self-interest and denied Musk the financing because he had zero chance of making money at the purchase price, we would be much better off. But presumably some of the critical decision-makers like the idea of a right-wing takeover of an important social media site enough to lie to themselves or set a lot of money on fire.