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Comment by rossdavidh | Hacker News Reader

Hypothesis: with the wavering of Credit Suisse and other big banks, and the bond market more generally, Elon Musk thinks that by agreeing to buy, he moves the onus onto the banks who agreed to finance the deal. If they cannot, in the current climate, sell the buyout bonds that they are contractually obligated to, he may still get to walk away` without the legal trouble. Disclaimer: I don't know what I'm talking about. https://finance.yahoo.com/news/twitter-lbo-revives-12-5-1831... "...bankers may struggle to sell the risky Twitter buyout debt just as credit markets begin to crack."

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Look's like you're being downvoted but no one is bothering to explain why.

Based on other comments in this thread, your hypothesis (while interesting) might fall short. Apparently there is a legal stipulation that if bank financing falls through, Musk is personally on the hook to make up the difference.

If the stipulation is in place, Musk can't use the bank's failure to finance as a scapegoat for the deal falling through. He can't walk away from the deal paying a 1 billion dollar penalty, he will have to buy Twitter at the original agreed upon price.

That being said, if your hypothesis is valid and the deal falls apart due to lack of financing -- buying some put options on Twitter right now could prove to be an extremely profitable move.

No, the banks are committed. They can sell the debt to others, but if that fails, they just have to finance it themselves.

Musk actually can get out of the deal if he doesn't have the financing. But he has the financing, because the banks signed commitment letters. These commitment letters are valid until the beginning of next year. That's why he tried to drag out the lawsuit in the hope, that deadline might be passed.

Selling the Twitter debt is the banks’ problem. They’ve already committed to fund debt financing off their own balance sheets (absent certain circumstances that don’t exist here).

It’s not a happy day for the banks, and they may yet try to walk, but they will absolutely have legal exposure if they do. When Musk started getting second thoughts, Grimes (the Morgan Stanley Grimes, not the surrogate Grimes) started distancing himself from that aspect of this clown show right away.

That is an interesting hypothesis.

But,

a) The banks may well be able to sell these bonds, just with a higher yield. b) Maybe there are some clients out there with lotsa cash (Buffet, Bezos, Gates) who would love to have Elon owe them tens of billions of dollars at 10% yield.

If the whole thing goes tits up, then the bondholders own Twitter, not Elon.

Larry: Keep these texts out of discovery! Elon: So, the billion investment is off? Larry: Done! Elon: Sorry Twitter, but financing is no go cuz u made em mad. Here is a billion. KthxBi.

Nope, the banks may struggle to sell the debt, but that just means they're on the hook for it. There's no "get out of jail" card there.

Great take here, I doubt you can get banks to finance this in the current climate.

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