> Loans that Elon Musk used to buy Twitter have become the worst merger-finance deal for banks since the financial crisis of 2008-09, according to a report.
> The Journal reports that banks haven’t been able to sell the debt without taking huge losses, predominantly because of the company’s poor financial performance.
https://finance.yahoo.com/news/elon-musk-twitter-buyout-officially-161518178.html
"Let's lend $13bln to a thirsty edgelord for buying out a web forum, what's the worst that could happen?"
These are deeply, deeply unserious people.
Bailout when.
@rysiek as soon as Musk got his seat on the Trump government's panel of advisors.
@eliasp you're right and I hate it
in that weird scenario where i'm hoping capitalism kills fascism because fascism isn't long-term profitable
@rzeta0 since when is today's late-stage capitalism interested in long-term anything?
@rysiek My blind uncle could've seen this coming. Is he tired of being a genius already?
@rysiek sorry, I could use some help understanding this:
They’re still loans with interest, that he’s on the hook for paying, right? The worst case scenario is he declares bankruptcy, but isn’t the second worst case scenario is he just pays off the loans to the banks that loaned him the money? Or is everything much more awful and rigged than that? I’m sure it is, but my only frame of reference in borrowing large* amounts of money is trying to get a bank to buy a house in my name.
@forty2 @rysiek It's a business model thing. These institutional bankers aren't so much in the business of loaning corporations money as getting corporations to take out a loan and collecting a fee/commission. The idea here is a lot like a mortgage broker; the bank will loan money to the company, receiving a bunch of fees along the way, and then they'll sell the loan on to other institutional investors who will collect the principle & remaining interest. They can then use the proceeds from the sale to give out more loans. This is a useful arrangement - companies can deal with a single entity to finance their operations, investors can provide loans without needing to find & vet potential companies, and the bankers in the middle can buy their fancy cars and penthouse apartments.
Of course, unlike with mortgage brokers, the banks here are loaning their own money. You might think that's their entire business, right? But the thing is, they don't want a $13 billion loan on their books, even if it is an asset from the perspective of the bank. They want $13 billion in cash which they can use to issue new loans, or to pay out depositors. If your business relies on a speedy cash flow to survive (such as, I don't know, fractional reserve banking), having $13 billion in illiquid assets gumming up your balance sheet is potentially ruinous.
And the risk of default is real and significant. We know this because nobody is willing to buy the loan at its book value. If the company declares bankruptcy, the lenders will lose most or all of their loans, but even just the potential of a collapse is risky, because that forces lenders to renegotiate the terms of the loan to try and secure any returns. The risk here is not like a mortgage, where if you default the bank will sell your house and get their money back (and pay you any surplus). The risk here is more like a credit card, where if you default there may be nothing left which can be sold to cover the loan.
2 EDITS: added/rephrased a few words here & there
@markmason @forty2 @rysiek ... where you go on to nuke twice your loan off the worth of the company.
@markmason @forty2 @rysiek ah, thanks. That’s crazy. I’m applying for a home loan and there’s a clause on one form where it says basically “if you have unknown or undisclosed debts, you could go to jail”.
I would have thought if you take out a loan 5 orders of magnitude larger there’d be some “if you fuck this up, we’ll literally eat one of your children” clauses, but cool to see the banks are just so chill when it comes to 11 figure loans.
@rysiek You're forgetting they're the bootlicker kind of people too
"Let's lend $13bn to a rich thirsty edgelord, and hopefully he'll do his banking with us!"
@rysiek Couldn't happen to a nicer bunch of people.
@CodingItWrong "poor" as in "lacking money" or "poor" as in "lacking acumen"?
@rysiek He was so rich, it just had to be cool.