Elon Musk’s antics have made it arduous for his banks — Morgan Stanley, Bank of America, and Barclays — to promote the debt required to do the Twitter deal. So they’re simply going to carry it, all $13 billion of it, The Wall Street Journal reports. Truly a next-level “hold-my-beer” transfer, as a result of it threatens to deliver leveraged buyouts to a halt.
Typically, a financial institution sells the debt used to create a buyout, and strikes on to the subsequent deal. But 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 move threatens to bring the faltering leveraged-buyout pipeline to a standstill by tying up capital that Wall Street could otherwise use to back new deals.”
Part of the purpose for holding Musk’s debt is as a result of the urge for food for it has decreased attributable to (waves vaguely at the Fed) monetary circumstances. But 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 may be nonetheless no assure the unpredictable billionaire will comply with by way of or another bother received’t come up. (If the deal doesn’t shut by that point, the two events will go to court docket in November.) That means the banks wouldn’t have sufficient time to market the debt to third-party traders, a course of that usually takes weeks, even when they needed to promote it now.
Emphasis mine, clearly. The draw back of being unpredictable is that cash sorts actually, actually don’t like surprises!