As X, once known as Twitter, faces increased scrutiny over its financial health, it appears to be at a precarious crossroads.
Billionaire Elon Musk secured a whopping $13 billion in funding from a syndicate of six major banks, including Morgan Stanley and Bank of America, to support his $44 billion acquisition of Twitter, as it was known at the time. The landmark deal between Wall Street banks has been reclassified as the industry’s worst merger-financed deal since the 2008-2009 financial crisis, resulting in significant write-downs and, in at least one instance, a reduction in executive compensation packages.
When banks facilitate takeovers by providing cash, they frequently securitize the debt and sell it to investors, generating revenue through interest charges on the transaction. Despite best efforts, achieving this goal has proven elusive with X. Due to the corporation’s precarious financial situation, the loans have dragged on banks for a significantly longer period compared to other similar business loans, becoming “hung offers” in industry terminology.
According to insiders familiar with the matter, the WSJ investigation reveals that banks agreed to underwrite loans to the world’s richest individual largely because the prospect of banking his wealth was too enticing to resist. However, it appears this deal may prove costly – unless the banks can successfully extract interest and compensation from their billionaire client once the loans mature.
