Musk's Banks May Have A Way To Cut Losses On Twitter Deal

Elon Musk's banks, faced with huge losses on their commitment to finance the $44 billion buyout of Twitter Inc., may not be able to back out of the deal easily but they might have a way to minimize the hit they take, Shankar Ramakrishnan and Krystal Hu reported for Reuters..

Photo Insert: Morgan Stanley, Bank of America Corp., Barclays Plc and Mitsubishi UFJ Financial Group Inc. led a $13 billion financing for the bid by Musk.

Morgan Stanley, Bank of America Corp., Barclays Plc and Mitsubishi UFJ Financial Group Inc. led a $13 billion financing for the bid by Musk, the world's richest man and chief executive of Tesla Inc. and SpaceX.

Typically, banks would sell the debt to investors and pocket an underwriting fee. But the terms of the financing were set in April when Musk first made an offer for Twitter and the market for such debt has collapsed since then.

That means if banks tried to sell the debt now, they would have to do so at a loss to entice investors to take it off their hands.

Banks could, however, try to minimize their losses by increasing the amount of debt that is secured by collateral so that it is less risky, holding a bigger portion of it on their balance sheets, and reducing the amount they have to sell to investors in the near term, according to half a dozen debt capital market bankers and investors.

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