Elon Musk’s purchase of Twitter is the worst deal for banks since the GFC

The Wall Street Journal said in an article on Tuesday that the $13 billion loan that Elon Musk used to acquire Twitter has become one of the most difficult merger and financing deals for banks since the financial crisis of 2008-2009 .

According to The Wall Street Journal, seven banks, including Morgan Stanley and Bank of America, offered the loan for Musk’s acquisition of Twitter (now renamed X) in October 2022.

They explain that banks are usually quick to offload such debt to other investors, but X’s poor financial performance made this difficult, leaving the loans “dangling” on their balance sheets.

The WSJ reported that these loans have been written down significantly since the acquisition.

Despite these failures, the banks continue to collect interest, with the hope that X could eventually repay the principal.

However, the company’s financial struggles are said to have made recovery uncertain.

The WSJ noted that X’s value has fallen to about $19 billion, well below its $44 billion purchase price, further complicating the banks’ situation.

The publication, citing data from Dealogic, adds that the situation has also affected banks’ market positions and compensation, with some banks losing their top positions in the leveraged finance rankings.

In addition, the WSJ states that Barclays’ investment bankers have seen their compensation cut due to making suspended trades, particularly X.

Despite these challenges, banks are hesitant to cut ties with Musk given potential future business opportunities with his other ventures, such as SpaceX.