WSJ: Banks are trying to get rid of loans they gave Musk for Twitter

Elon Musk's Twitter acquisition was the worst acquisition for banks. Musk's $13 billion loan from banks for the platform has been on hold for two years. Now, according to the WSJ, banks are trying to get rid of loans they gave Musk

The $13 billion Elon Musk borrowed to buy Twitter has become the worst merger-financing deal for banks since the 2008-09 financial crisis. Seven banks involved in the deal, including Morgan Stanley and Bank of America, lent Musk the money to buy Twitter, now called X, in October 2022.

Banks that provide loans for acquisitions often quickly sell the debt to other investors to get it off their balance sheets and make money from the fees. The banks were unable to sell the debt without incurring major losses, largely because of X’s poor financial performance, and the loans remained ‘suspended’ on their balance sheets. The resulting losses weakened the banks’ credit, according to people involved in the deal. At one bank, the merger was a factor in reducing the compensation of the department.

The value of Musk’s loans plummeted after the $44 billion buyout was completed, but new analysis shows how their consistent underperformance has put the deal at a historic low point. The Twitter loans have been pending longer than any similar deal the research firm has records for since the 2008-09 financial crisis, according to data from PitchBook LCD. There were many more pending deals during that period. Still, banks are typically able to sell or write off most of their outstanding debt within about a year of making the loans. One of the pending deals—a $20 billion all-debt buyout in 2007—was larger than Twitter’s, but it went bankrupt about 12 months after the banks wrote the check.