Elon Musk’s Twitter buyout is the worst deal for banks since GFC – WSJ

The Wall Street Journal said in an article Tuesday that the $13 billion loan Elon Musk used to acquire Twitter has become one of the most challenging merger-finance deals for banks since the 2008-09 financial crisis.

According to The Wall Street Journal, seven banks, including Morgan Stanley and Bank of America, provided the loan for Musk’s acquisition of Twitter (now rebranded as X) in October 2022.

They explain that banks typically offload such debt quickly to other investors, but X’s weak financial performance has made this difficult, leaving the loans “hung” on their balance sheets.

The WSJ reported that these loans have been devalued significantly since the acquisition.

Despite these setbacks, the banks continue to collect interest payments, with hopes that X might eventually repay the principal.

However, the company’s financial struggles are said to have made the recovery uncertain.

The WSJ noted that the value of X dropped to around $19 billion, far below its acquisition price of $44 billion, further complicating the banks’ situation.

The publication, citing data from Dealogic, adds that the situation has also impacted the banks’ market standings and compensation, with some banks losing their top positions in the leveraged-finance rankings.

Furthermore, the WSJ states that Barclays’ investment bankers saw their compensation slashed due to the performance of hung deals, particularly X.

Despite these challenges, banks are hesitant to sever ties with Musk, given the potential future business opportunities with his other ventures such as SpaceX.