Musk's banks to book Twitter loan losses -sources

tech.hindustantimes.com:

Some of the banks that lent Elon Musk $13 billion to buy Twitter are preparing to book losses on the loans this quarter, but they are likely to do so in a way that it does not become a major drag on their earnings, according to three sources with direct knowledge of the situation.

Banks typically sell such loans to investors at the time of the deal. But Twitter's lenders, led by Morgan Stanley, could face billions of dollars in losses if they tried to do so now, as investors shy away from buying risky debt during a period of economic uncertainty, market participants said. In addition, Twitter has seen advertisers flee amid worries about Musk's approach to policing tweets, hitting revenues and its ability to pay the interest on the debt.

Banks still have to mark the loan to its market value on their books and set aside funds for losses that are reported in quarterly results. In the absence of a price determined by actual sales of the debt, however, each bank can decide how much to write it down based on its market checks and judgment, according to the three sources who are familiar with the process of determining the value of such loans.

The biggest chunk of the debt -- $10 billion worth of loans secured by Twitter's assets -- might have to be written down by as much as 20%, one of the sources said. The hit on the loan, distributed among seven banks, could probably be managed by most of the firms without creating a significant hit to profits, the source added.

Another one of the three sources with direct knowledge of the matter estimated that some banks might only take a 5% to 10% writedown on the secured portion of the loan.

The deliberations of how some of these banks are thinking about accounting for these losses