The $13 billion loan used by Elon Musk to buy Twitter has become one of the most difficult merger-financing deals for banks since the 2008-09 financial crisis, The Wall Street Journal reported Tuesday.
Seven banks, including Morgan Stanley and Bank of America, financed Musk’s acquisition of Twitter (now rebranded as X) in October 2022, according to the Wall Street Journal.
Banks would normally sell such debt quickly to other investors, but Company X’s poor financial performance has made this difficult, leaving the loan “stuck in limbo” on their balance sheets, he explained.
The WSJ reported that the value of those loans has fallen significantly since the acquisition.
Despite these difficulties, the bank continues to make interest payments in the hope that X will eventually repay the principal.
However, due to the company’s financial difficulties, recovery is said to be uncertain.
The WSJ noted that the bank’s situation has become even more complicated as X’s value has fallen to around $19 billion, well below the acquisition price of $44 billion.
The situation has also affected banks’ market standing and compensation, with some banks losing their top spots in leveraged finance rankings, the magazine said, citing Dealogic data, adding.
Moreover, the WSJ reports that Barclays’ investment bankers, in particular, have had their compensation slashed as a result of X’s hung deal.
Despite these challenges, banks have been hesitant to cut ties with Musk, given potential future business opportunities with his other ventures, including SpaceX.