David Bridges
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Banks led by Morgan Stanley may lose about $500 million in their effort to fund Elon Musk’s $44 billion purchase of Twitter (NYSE:TWTR) as the debt market have seized in recent months.
Lenders including Morgan Stanley (MS) Bank of America Corp. (BAC) Barclays Plc (BCS) and Mitsubishi UFJ originally committed $13 billion of debt financing for the transaction.
Those banks may now lose about $500 million if they had to sell the debt now, according to Bloomberg calculations in a late Friday story. They originally agreed to fund the purchase even if they couldn’t sell the debt and now its unlikely investors would want to buy the debt in the current markets.
The report comes as Twitter’s (TWTR) trial to force Elon Musk to go through with a $44 billion buyout has been paused until Oct. 28 to allow the parties to close on the deal, the Delaware judge presiding over the case ruled on Thursday.
The banks have been bruised in the debt markets in other big transactions in recent weeks. Bloomberg reported Tuesday that banks including BofA (BAC) and Barclays (BCS) are expected to fund the $8.35 billion takeout of Nielsen (NLSN) by Elliott Management and Brookfield Business Partners, which is scheduled to close this week.
There also appears to be a high likelihood that banks, including Citi (C) and BofA (BAC) will need to fund the more than $5 billion in debt for Apollo’s (APO) planned acquisition of Tenneco (TEN), according to the Bloomberg report.
And last month banks were reportedly on the hook for Citrix Systems $16.5 billion sale to Elliott and Vista Equity, where banks that underwrote debt backing the deal are collectively headed for $500M in losses when the debt was auctioned off at a discount.
Maya Kensington
Sophie Langley
