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Wall Street banks have sold almost all $12.5bn of debt tied to Elon Musk’s Twitter purchase

Investor perception of debt has changed since Donald Trump’s election victory

Elon Musk bought Twitter for $44 billion in October 2022, and later renamed it X © AFP via Getty Images

Elon Musk bought Twitter for $44 billion in October 2022, and later renamed it X © AFP via Getty Images

Wall Street banks have rid themselves of almost all the $12.5bn of loans Elon Musk used to help finance his takeover of Twitter, capping a stunning reappraisal of the debt since Donald Trump handed the billionaire a role at the heart of his administration.

A group of banks led by Morgan Stanley sold $4.74bn of the loans late on Thursday, more than the $3bn initially planned, as investors submitted $12bn of orders, according to people familiar with the matter.

The latest sale is a boon for the group of seven lenders, including Bank of America, Barclays and MUFG, who have been saddled with the debt since stumping up $12.5bn in October 2022 to fund Musk’s purchase of the social media platform, which he renamed X.

They now hold just over $1bn of the loans after a sale that underlines how Musk’s proximity to Trump has shifted perception of debt that investors had previously perceived as very risky.

In a further sign of demand, large blocks of the loans were on Friday already trading at between 101 and 102 cents on the dollar in the secondary market following Thursday’s sale.

The lenders turned down offers from investors to buy the debt at steep discounts in 2023 and 2024, betting instead that an eventual turnaround in X’s operations would limit potential losses on the loans.

 

 

Column chart of Banks have offloaded more than $11bn of debt tied to the Twitter buyout showing Twitter/X: the debt stack



Investor interest in the loans grew in the weeks following Trump’s election victory in November, with Morgan Stanley receiving pitches to buy pieces of the debt at 75 to 80 cents on the dollar. Highlight

The appeal of the loans increased further after Musk gave a stake in his artificial intelligence start-up xAI to the company. As well as bolstering the social media company’s valuation, the move provided new security to anyone holding the loans.

In January, Morgan Stanley sold $1bn of debt to a group of large credit investors, including Diameter Capital Partners. That was followed by the sale in February of $5.5bn of the loans, at 97 cents on the dollar, before the banks sold them this week without any discounts.

As part of the increased sale of fixed-rate loans on Thursday, X agreed to terminate a $500mn revolving credit facility it had with the seven banks.

 

Bar chart of Initial financing plan ($bn) showing How Musk's lenders committed to finance his Twitter buyout

 

Investors are now waiting to bid on the sale of more than $1bn of unsecured loan, the final, riskiest portion of the deal. That debt will pay out a higher interest rate, but is more exposed to losses if X were to fall into bankruptcy or needed to restructure its debts.

It is unclear how Morgan Stanley and the six other banks will proceed with the sale. The lenders could either market the debt or refinance it with new preferred equity, given the strong demand for other portions of the $12.5bn of loans, according to one person familiar with the matter. Highlight

Morgan Stanley declined to comment. X did not respond to a request for comment.

Author: Eric Platt and Will Schmitt in New York and Robert Smith in London

Source: Financial Times

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