Banks May Regret $13B Loan to Musk for X

X, previously known as Twitter, owned by Elon Musk, Appears to Be a Poor Investment Now

As readers may recall, Elon Musk borrowed $13 billion from Morgan Stanley, Bank of America, and five other significant banks to finance his $44 billion acquisition. The deal has become the most detrimental merger-finance transaction for banks since the 2008-2009 financial crisis, as the Wall Street Journal reported.

For what reason? Banks typically sell the debt to others by lending money for takeovers, thereby earning commissions on the transaction. Due to X’s inadequate financials, this has been impossible. Consequently, the loans have become “hung deals,” as they have burdened the banks.

The WSJ observes that the banks consented to underwrite these loans “primarily due to the allure of banking the world’s wealthiest individual.” It appears to be a costly error unless they can extract interest payments from X and repay the principal upon the maturity of the loans.