- Musk’s Twitter deal could leave banks holding $13 billion in debt, The Wall Street Journal reported.
- That would make it the biggest deal “locked up” and mean lenders could sell the debt when markets rebound.
- Banks involved in the $44 billion takeover include Morgan Stanley, Bank of America and Barclays.
- For more stories, visit Business Insider.
Elon Musk’s Twitter deal could leave banks stuck with $13 billion in debt, making it the biggest stalled deal on record.
People familiar with the matter told The Wall Street Journal that lenders helping fund the $44 billion deal, including Morgan Stanley, Bank of America and Barclays, do not plan to sell the debt immediately to avoid losses. at least $500 million.
The Journal reported that if all banks took such an option, they could sell it at a higher value when prices rebound.
That means it could be the biggest stalled deal ever, eclipsing the billions of lenders that got stuck after the 2008 financial crisis.
Banks agreed to provide debt to Musk earlier this year before investors were found, as is customary in leveraged buyouts.
Rising interest rates and a looming recession have sown doubt, and Musk’s public criticism on Twitter hasn’t helped the process, according to The Journal.
Time is another factor, as Musk and Twitter must complete the deal by October 28 or face a trial in November.
The banks hope to sell some of the debt in early 2023, assuming the deal is done and market prices improve, sources told the newspaper. A person who spoke to the Journal said the debt could be split to facilitate the sale.
Morgan Stanley, Bank of America and Barclays did not immediately respond to Insider’s request for comment.
Musk’s takeover has drawn criticism and concern. Employees left the company before the deal was completed, and Twitter denied reports that the world’s richest man planned to cut 75% of his workforce.
Meanwhile, the US government is considering a security review of the acquisition, which means President Joe Biden could ultimately kill the deal.