Elon Musk's $11 billion loan used for the Twitter acquisition has become one of the most problematic deals for banks since the financial crisis of 2007-10, according to recent reports by the Wall Street Journal. Seven major financial institutions, including Morgan Stanley and Bank of America, financed Musk's purchase of Twitterânow rebranded as Xâin October 2022.
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Typically, banks aim to offload such debt quickly to other investors, profiting from fees and reducing risk. However, Xâs underwhelming financial performance has left these loans stuck on the banks' balance sheets, causing significant financial strain and reducing their creditworthiness.
The stagnant nature of this debt, coupled with X's poor financial results, has left the banks unable to sell the loans without incurring heavy losses. The situation has even impacted the compensation of some bank departments involved in the deal. The loans have lingered for much longer than usual, surpassing the duration of similar deals tracked since the 2007-10 crisis.
One of the rare exceptionsâa $19 billion all-debt buyout in 2005âwent bankrupt within a year, but even that case did not see the same level of prolonged financial burden that Muskâs Twitter deal has caused.
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