The banks which loaned Elon Musk money to help buy Twitter expect to lose $2 billion on the debt, report says
Elon Musk's Twitter purchase was funded by $13 billion of loans from banks like Morgan Stanley. Now they're trying to sell the debt at a cut-price, per WSJ.www.businessinsider.com
The people who made the decision to loan billions to this idiot should lose their jobs.
bankers make bad deals all the time, the bad deals of this size usually take 4-10 years to really materialize as a BAD deal. the point is to earn props and bonuses for making the deal and moving on up elsewhere in the bank or at another institution before shyt hits the fan. the deals are always initially attractive because of the interests payments made on the loan. private equity firms finesse banks for leveraged buyouts with attractive interest payments and collateral, then they use the good credit of the business to get multi-million dollar loans that they have no intention of paying back, execs gets bonuses and the business goes deep into the red and creditors can fight over the scraps when bankruptcy is filed.
trump ran a similar scam and thats why american banks stopped giving him loans and then he went to the russians.
edit: I had A.I write a story on how it works...
Sure, here's a detailed story about how a leveraged buyout can be done:
Let's say there is a company called ABC Corporation that has been struggling financially for some time. The company has a lot of debt and is having trouble meeting its obligations. However, the company also has valuable assets, such as real estate or intellectual property, that could be used as collateral for a loan.
Enter a private equity firm called XYZ Capital. XYZ Capital sees an opportunity to make a profit by acquiring ABC Corporation through a leveraged buyout. They approach ABC Corporation with an offer to buy the company for a premium price, but they don't have the cash to do so. Instead, they propose a leveraged buyout.
In a leveraged buyout, the private equity firm borrows money to finance the acquisition of the target company. The borrowed money is secured by the assets of the target company, which means that if the target company defaults on the loan, the lender can seize those assets to recover their money.
XYZ Capital proposes to borrow $100 million from a bank to finance the acquisition of ABC Corporation. They will use the assets of ABC Corporation as collateral for the loan. To sweeten the deal, they offer the bank an attractive interest rate and promise to repay the loan within five years.
The bank agrees to the loan, and XYZ Capital acquires ABC Corporation for $150 million. They use the $50 million difference between the purchase price and the loan amount to pay themselves a hefty dividend.
Now, XYZ Capital owns ABC Corporation, but they have a lot of debt to service. They start cutting costs and laying off employees to improve profitability. However, they also start taking on more debt to fund their operations. They use the assets of ABC Corporation as collateral for these new loans, which puts the company at even greater risk.
Eventually, ABC Corporation can no longer keep up with its debt payments, and it files for bankruptcy. The bank that lent XYZ Capital the money to acquire ABC Corporation is left holding the bag, as they cannot recover their money from the bankrupt company. Meanwhile, XYZ Capital walks away with a hefty profit, having extracted value from ABC Corporation without ever intending to pay back the loan.
This is just one example of how a leveraged buyout can be done, and it highlights the risks involved in this type of financial operation. While leveraged buyouts can be a way for companies to access capital and grow their businesses, they can also be used by private equity firms to extract value from struggling companies without regard for the long-term consequences.
me: can you cite some well-known real-world examples of this happening?
AI: Certainly! Here are a few well-known real-world examples of leveraged buyouts:
- RJR Nabisco: In 1989, Kohlberg Kravis Roberts (KKR) acquired RJR Nabisco in a leveraged buyout worth $25 billion. KKR used a combination of debt and equity to finance the acquisition, and the deal became one of the largest leveraged buyouts in history.
- Toys "R" Us: In 2005, a group of private equity firms including Bain Capital, KKR, and Vornado Realty Trust acquired Toys "R" Us in a leveraged buyout worth $6.6 billion. The deal saddled the company with a significant amount of debt, which ultimately led to its bankruptcy in 2017.
- Hertz: In 2005, a group of private equity firms including Clayton Dubilier & Rice, Carlyle Group, and Merrill Lynch Global Private Equity acquired Hertz in a leveraged buyout worth $15 billion. The deal was financed with a significant amount of debt, and Hertz struggled to meet its debt obligations in the years following the acquisition.
- Energy Future Holdings: In 2007, a group of private equity firms including KKR, TPG, and Goldman Sachs acquired Energy Future Holdings (formerly known as TXU) in a leveraged buyout worth $45 billion. The deal was one of the largest leveraged buyouts in history, and it saddled the company with a significant amount of debt. Energy Future Holdings filed for bankruptcy in 2014.
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He is a true Scamgod.
