Morgan Stanley Bank, Bank of America, Five Others might regret $13B loan to Elon Musk
The banks may be regretting their $13 billion loan to Musk for the purchase of Twitter.
These days, it seems like a horrible idea to invest in X, formerly known as Twitter. Readers may remember that Elon Musk secured a $44 billion purchase loan with the help of $13 billion in loans from Morgan Stanley, Bank of America, and five other large banks.
From the 2008-2009 financial crisis onward, the agreement has turned out to be the worst merger-finance deal for banks, according to the WSJ. For what reason? Banks often sell the debt they guarantee to third parties in exchange for fees when they lend money for takeovers. The loans have burdened the banks and turned into "hung deals," as the industry refers to them, since X's poor financials have prevented that.
According to the Wall Street Journal, the banks decided to approve these loans "mostly because it was too good to refuse the temptation of banking the richest person on the planet." It appears to be an expensive error now unless they can get X to pay interest and principal back when the loans mature.
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