He wants to purchase Twitter and needs a $13 billion loan
We believe: The individual constructs electric automobiles and launches spacecraft. He’ll be a breeze on Twitter. He is also the richest person.
If I am a bank, I can’t see any danger. So I say alright I will give you the advance.
Important detail: We should apply for the loan on Twitter’s behalf, not Elon Musk’s, according to Elon.
He gains two advantages from this:1) He has to pay $13 billion less, and 2) Twitter, not Elon Musk, will go bankrupt if things go wrong. But keep this in mind: I manage a bank. Risk isn’t my thing. On my balance sheet, I don’t want such a large loan. Therefore, I choose to sell the loan.
My friends, this is known as a leveraged buyout (LBO):
A wealthy man seeking to acquire a business receives a substantial loan from a bank. The massive loan is then sold by banks to mutual funds and loan asset managers. The cycle continues when banks provide loans to the next wealthy individual.
I enjoy LBOs:1) The LBO market is quite large (146 billion dollars) and profitable.
However, Elon came about. He started giving random blue ticks and scaring advertisers after taking my loan and purchasing Twitter.
Due to this fact, people are refusing to purchase the loan from me because they believe Elon cannot fix Twitter.
This is a major issue. I’ll have to keep the goddamn loan myself if I can’t sell it.
But more importantly, I won’t be able to help the next wealthy individual who wants to buy a business .The LBO market will also end.
This is precisely what is taking place right now.
Elon Musk received a $13 billion loan for Twitter from seven banks, including Morgan Stanley and Barclays. However, nobody wanted to purchase this loan when they went to sell it. Their best offer was to sell the loan at a loss of $500 million.
As a result, the banks chose not to sell the loan. Instead, they will wait until next year to sell the loan and then try again. This means that banks can’t finance any more LBOs or the huge $146 billion LBO market.
