After years of struggling to offload debt associated with Elon Musk's acquisition of Twitter, Wall Street banks are finally making progress. Morgan Stanley and a consortium of lenders are near completion of selling another $3 billion in loans, following a successful $5.5 billion sale last week. This latest sale comes after investor interest in the debt rebounded, driven by X's stake in Musk's AI startup and the recent presidential election.
Wall Street banks are nearing the completion of selling $3 billion in loans backing Elon Musk 's acquisition of Twitter, shedding another significant chunk of a debt deal that has burdened their balance sheets for over two years. This latest disposal follows a successful sale last week by bankers led by Morgan Stanley, who offloaded $5.5 billion of debt linked to the takeover, initially acquired in 2022 when market volatility caused potential buyers to flee.
Orders for the current sale have exceeded $5 billion, fueling the banks' confidence in eliminating the initial discount offered on the debt. Morgan Stanley is now aiming to price the secured loans, which carry a fixed interest rate of 9.5 percent without a discount, according to sources familiar with the matter. This sale marks another victory for the seven lenders who collectively provided roughly $13 billion to finance Musk's $44 billion takeover of Twitter, now known as X. This group includes Bank of America, Barclays, Mizuho, MUFG, Société Générale, and BNP Paribas.In 2022, Wall Street lenders aggressively pursued roles in financing the hostile takeover of Twitter, hoping to provide temporary funding to Musk before accessing large credit markets. However, market turmoil, including the Federal Reserve's aggressive interest rate hikes, and Musk's initial attempt to withdraw from the deal, prompted apprehension among potential lenders. Ultimately, the deal's closure forced Morgan Stanley and the six other banks to shoulder the financial burden themselves, restricting their ability to underwrite other loans and leading to substantial losses as they wrote down the value of the debt. However, a shift in investor sentiment and Musk's close association with former President Donald Trump have turned the tide for the banks. Investor interest in the debt has rebounded, further bolstered by X's stake in Musk's artificial intelligence startup, xAI. This resurgence in interest has enabled the banks to sell off a significant portion of the debt.The recent sales, along with $1 billion of debt sold to hedge funds including Diameter Capital Partners in January, clear most of the debt the banks initially extended to finance the transaction. They will be left holding approximately $3 billion in junior unsecured bridge loans, according to sources. The $6.5 billion in term loans previously sold have demonstrated a strong recovery since trading commenced, with brokers on Wall Street frequently quoting the debt at prices between 99 and 100 cents on the dollar. This positive market performance has emboldened the group of seven lenders as they consider pricing the secured loans this week. Morgan Stanley declined to comment and X did not respond to a request for comment
FINANCING DEBT TWITTER ELON MUSK WALL STREET INVESTOR INTEREST AI
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