Submission + - Twitter deal may be the worst leveraged buyout deal for banks since Lehman (fortune.com)
smooth wombat writes: Purchased for $44 billion after an acrimonious attempt to back out of the deal, it is looking like Elon Musk's purchase of Twitter is the worst leveraged buyout since the 2008 global financial crisis. At last check, the company is worth only one quarter of its purchase price, a plummet exacerbated by Musk telling advertisers to ‘Go fuck yourself’ when they chose not to advertise on the site.
Typically, Wall Street banks will underwrite the debt financing from major deals, later packaging and selling the debt on to professional investors like hedge funds and pension plans in a matter of weeks or sometimes months. But the poor timing of the October 2022 Twitter deal, struck just when borrowing costs began to soar, combined with the dire financials of the social media company, soured any appetite on the part of money managers.
Nearly two years on, investment banks have been unable to offload the debt, tying up precious capital and limiting their ability to originate and finance more deals. In fact, no LBO debt has sat longer on balance sheet since the Lehman Brothers bankruptcy, according to new information from PitchBook LCD cited by the Wall Street Journal on Tuesday.
The previous record was 13 months stemming from the 2007 acquisition of car-parts group Tower Automotive by private equity firm Cerberus during the peak of the subprime bubble.
Typically, Wall Street banks will underwrite the debt financing from major deals, later packaging and selling the debt on to professional investors like hedge funds and pension plans in a matter of weeks or sometimes months. But the poor timing of the October 2022 Twitter deal, struck just when borrowing costs began to soar, combined with the dire financials of the social media company, soured any appetite on the part of money managers.
Nearly two years on, investment banks have been unable to offload the debt, tying up precious capital and limiting their ability to originate and finance more deals. In fact, no LBO debt has sat longer on balance sheet since the Lehman Brothers bankruptcy, according to new information from PitchBook LCD cited by the Wall Street Journal on Tuesday.
The previous record was 13 months stemming from the 2007 acquisition of car-parts group Tower Automotive by private equity firm Cerberus during the peak of the subprime bubble.
