Banks financing Musk’s Twitter deal face hefty losses

Oct 5 (Reuters) – Elon Musk’s U-turn on buying Twitter Inc (TWTR.N) could not have come at a worse time for the banks funding a large portion of the $44 billion deal and they could be facing significant losses.

As in any large acquisition, banks would look to sell the debt to get it off their books. But investors have lost their appetite for riskier debt such as leveraged loans, spooked by rapid interest rate hikes around the world, fears of recession and market volatility driven by Russia’s invasion of Ukraine.

While Musk will provide much of $44 billion by selling down his stake in electric vehicle maker Tesla Inc (TSLA.O) and by leaning on equity financing from large investors, major banks have committed to provide $12.5 billion.

They include Morgan Stanley , Bank of America Corp and Barclays Plc (BARC.L).

Mitsubishi UFJ Financial Group Inc (8306.T), BNP Paribas SA (BNPP.PA), Mizuho Financial Group Inc (8411.T) and Societe Generale SA are also part of the syndicate.

Noting other recent high-profile losses for banks in leveraged financing, more than 10 bankers and industry analysts told Reuters the outlook was poor for the banks trying to sell the debt.

The Twitter debt package is comprised of $6.5 billion in leveraged loans, $3 billion in secured bonds, and another $3 billion in unsecured bonds.

“From the banks’ perspective, this is less than ideal,” said Wedbush Securities analyst Dan Ives. “The banks have their…