Elon Musk’s takeover of Twitter Inc (NYSE:TWTR), which is expected to be completed this week, could leave lenders with a debt larger than the 2008 financial crisis, according to reports.
Several banks, including Barclays, Morgan Stanley, and Bank of America have agreed to provide US$12.5bn towards the US$44bn takeover cost.
As is custom with leveraged buyouts such as this, the banks involved would look usually to immediately offload the debt through syndication. However, terms on the loans would have been agreed upon in April or earlier, when Musk launched his bid, and when interest rates were much lower and market conditions much easier to syndicate the debt to spread the risk.
People familiar with the matter, quoted in The Wall Street Journal, claim however that the banks do not plan on selling the debt immediately, thus avoiding a US$500mln loss.
Instead, the banks plan on holding on to the debt to sell at a later date, possibly in early 2023, when prices bounce back and inflation eases.
The Tesla Inc boss's proposed takeover of Twitter has sparked controversy since the saga started back in April.
Musk had backed out of the deal on concerns over the reported number of bots on the social media site, but with legal action by Twitter pending to force him to go ahead with the deal he changed his mind nearly three weeks ago.
Employees at Twitter have also been concerned over the change of leadership, with some even leaving amid reports Musk could axe even more.