Welcome to Monday. Just like me, banks appear to be suffering from a hangover. As the world adjusts to the end of cheap(er) money, financing deals negotiated prior to the hike in interest rates are causing headaches for banks, as deals reach completion.

The lowdown

• 🛢 Oil takes a breather but supply still expected to be tight.

• 💸 Blackrock loses funds under management, as US Republicans emphasize ESG concerns – that the asset manager's anti-fossil fuel policy is economically damaging.

• 🚴‍♀️ Peloton’s CEO doesn’t understand why people aren’t happier he laid off 500 people. In a seemingly unintended pun, he blamed the news cycle.

Featured stories

Banks lose out as slow-moving deals now close

Banks’ interest in completing deals is moving inversely to the interest demanded by secondary purchasers of debt.

Two weeks ago, banks were reported to have lost $700 million upon completion of the Citrix Systems leveraged buyout. (Citrix is a software company that offers virtual desktops and cloud computing.) To offload the junk-rated debt from their books, the banks involved were forced to discount the debt from the levels at which it was underwritten. This is because the yield required to effectively market the debt to investors is much higher than when the debt packages were negotiated.

On Thursday, we mentioned that the Twitter deal will cause more pain for banks if it is completed. The Guardian is reporting a potential loss of $500 million for the banking syndicate involved.

In the case of Twitter, banks are likely to keep some of the debt on their own balance sheets, as they are unwilling to accept the large losses. This inability to move the debt from their books will then interfere with the banks’ ability to recycle capital. 

Being forced to renegotiate financing for the deal ($) is one reason that Elon Musk may have decided to move ahead with the deal at the previously agreed price, rather than negotiate on that and put financing at risk.

As leaders of the banking syndicate behind the buyout, Morgan Stanley is set to take the largest bath. In a welcome relief for some, current banking punching bag Credit Suisse is not involved.

The content we're consuming today

• Plaid CEO Zach Perrett asked Twitter for recommendations of primers on the banking system. We like The Field Guide to Global Payments. 

Off-balance sheet items

• The Rich List, from Whale Hunting and Project Brazen – A live investigation into who might be the world’s richest person, based on the idea that the ultra-rich are able to keep their wealth a secret.

The bottom line