Wall Street banks have successfully offloaded almost all of the $12.5 billion in loans used to finance Elon Musk's acquisition of Twitter, now known as X. The loans, initially viewed as risky by investors, have seen a dramatic reappraisal in value following Donald Trump's appointment of Musk to a key role in his administration.
Wall Street banks have almost completely offloaded the $12.5 billion in loans that Elon Musk used to finance his acquisition of Twitter, marking a dramatic shift in investor sentiment towards the debt since Donald Trump appointed Musk to a prominent role in his administration. A group of banks led by Morgan Stanley sold $4.
74 billion of the loans late Thursday, exceeding the initial target of $3 billion, as investors placed orders totaling $12 billion, according to sources familiar with the matter. This latest sale brings significant relief to the consortium of seven lenders, including Bank of America, Barclays, and MUFG, who initially provided the $12.5 billion in October 2022 to fund Musk's purchase of the social media platform, later renamed X. They now retain just over $1 billion of the loans. The sale highlights how Musk's association with Trump has altered perceptions of the debt, which investors previously viewed as highly risky.Further underscoring investor demand, large tranches of the loans were already trading at between 101 and 102 cents on the dollar in the secondary market on Friday following Thursday's sale. The lenders had previously rejected offers from investors to purchase the debt at steep discounts in 2023 and 2024, wagering instead that a potential turnaround in X's operations would mitigate potential losses on the loans. Investor interest in the loans surged in the weeks following Trump's election victory in November, with Morgan Stanley receiving proposals to buy portions of the debt at 75 to 80 cents on the dollar.The allure of the loans intensified after Musk granted a stake in his artificial intelligence startup, xAI, to the company. This move not only bolstered the social media platform's valuation but also provided additional security for any holders of the loans. In January, Morgan Stanley sold $1 billion of debt to a group of prominent credit investors, including Diameter Capital Partners. This was followed by a February sale of $5.5 billion of the loans, at 97 cents on the dollar, before the banks successfully sold them this week at par. As part of the increased sale of fixed-rate loans on Thursday, X agreed to terminate a $500 million revolving credit facility it had with the seven banks. Investors are now awaiting their opportunity to bid on the sale of more than $1 billion of unsecured loans, the final and riskiest portion of the deal. This debt will offer a higher interest rate but carries a greater risk of losses if X were to face bankruptcy or require debt restructuring. It remains unclear how Morgan Stanley and the six other banks will proceed with the sale of the remaining loans. The lenders could opt to market the debt or refinance it with new preferred equity, given the robust demand for other portions of the $12.5 billion loan package, according to a person familiar with the matter. Morgan Stanley declined to comment. X did not respond to a request for comment
ELON MUSK TWITTER LOANS WALL STREET BANKS DONALD TRUMP INVESTOR SENTIMENT DEBT REAPPRAISAL
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