Elon Musk’s Twitter deal could send the leveraged buyout market crashing


Elon Musk’s antics have made it difficult for his banks – Morgan Stanley, Bank of America and Barclays – to sell the debt needed to complete the Twitter deal. So they’ll just keep it, all 13 billion dollars, The Wall Street Journal reports. Truly a next-level hold-my-beer move as it threatens to end leveraged buyouts.

Typically, a bank sells the debt used to create a buyout and moves on to the next transaction. But since they’re holding Musk’s beers, they don’t have a free hand to hold anyone else’s. Or, as The WSJ says, “Twitter’s move threatens to cripple the failing leveraged buyout pipeline by tying up capital that Wall Street could otherwise use to support new deals.”

Part of the reason for Musk’s debt holding is that the appetite for it has diminished due to (waves vaguely at the Fed) financial conditions. But part of that is Musk’s mercurial approach to the deal:

Mr. Musk and Twitter have until October 28 to complete his planned purchase, and there is still no guarantee that the unpredictable billionaire will follow or that another problem will not arise. (If the deal isn’t done by then, both sides will go to court in November.) That means banks would not have enough time to market the debt to third-party investorsa process that normally takes weeks, even if they wanted to sell it now.

The emphasis is mine, of course. The downside of being unpredictable is that money types really, really don’t like surprises!


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