This week the Wall Street Journal reported that the major banks which were behind the financing of Elon Musk’s $44 billion takeover of Twitter (now known as X) are now struggling to contain the damage done to their balance sheets.

The report said that according to sources familiar with the matter, Musk was lent about $13 billion by seven major Wall Street banks, including Morgan Stanley, Bank of America, and Barclays, for the purposes of purchasing the social media platform one year ago. However now, as they prepare to sell the debt, the numbers indicate they will be taking a hit of at least 15%, or roughly $2 billion

The debt package which was given to Musk reportedly included $6.5 billion worth of term loans, $6 billion of debt split evenly between secured and unsecured bonds, and a $500 million revolving line of credit.

According to the report, the banks had planned to unload the debt shortly after the transaction. However as the stock market declined, and controversies erupted around Musk and his handling of the takeover, investor appetite rapidly declined, forcing the banks to maintain the debt on their own balance sheets at a discounted value.

According to the Wall Street Journal’s sources, the banks have begun preparations to attempt to unload some of the debt. The report noted the situation was eerily similar to what the banks experienced during the 2007-2008 banking crisis when investors lost confidence in the financial system.

The report went on to note that the debt produced by the takeover of Twitter has become among the largest and longest-held “hung” deals, which are typically costly for banks which find themselves funding unsuccessful acquisitions.

The Journal noted, “The X deal should have been a fee bonanza for the banks, who stood to earn tens of millions of dollars on the debt. Instead, their inability to resell it has been an albatross on their lending businesses and prompted questions from their own investors.” 

The report also noted, the banks will want to unload the debt fairly quickly, as the longer they hold onto it, the more scrutiny they may find themselves facing from regulators.