Elon Musk’s Twitter deal may tank the leveraged buyout market



Elon Musk’s antics have made it onerous for his banks — Morgan Stanley, Financial institution of America, and Barclays — to promote the debt required to do the Twitter deal. So that they’re simply going to carry it, all $13 billion of it, The Wall Avenue Journal experiences. Actually a next-level “hold-my-beer” transfer, as a result of it threatens to convey leveraged buyouts to a halt.

Sometimes, a financial institution sells the debt used to create a buyout, and strikes on to the following deal. However since they’re holding Musk’s beers, they don’t have a free hand to carry anybody else’s. Or, as The WSJ places it, “The Twitter transfer threatens to convey the faltering leveraged-buyout pipeline to a standstill by tying up capital that Wall Avenue may in any other case use to again new offers.”

A part of the rationale for holding Musk’s debt is as a result of the urge for food for it has decreased because of (waves vaguely on the Fed) monetary situations. However a part of it’s Musk’s mercurial strategy to the deal:

Mr. Musk and Twitter have till Oct. 28 to shut his deliberate buy, and there’s nonetheless no assure the unpredictable billionaire will observe by or another bother received’t come up. (If the deal doesn’t shut by that point, the 2 events will go to court docket in November.) Meaning the banks wouldn’t have sufficient time to market the debt to third-party buyers, a course of that usually takes weeks, even when they wished to promote it now.

Emphasis mine, clearly. The draw back of being unpredictable is that cash sorts actually, actually don’t like surprises!