Banks Offload $5.5 Billion Of Musk's X Debt To Investors, Source Says

NEW YORK: A group of banks, led by Morgan Stanley (MS.N), have sold $5.5 billion of approximately $13 billion in debt that they provided to facilitate Elon Musk's $44 billion purchase of Twitter, now known as X, in 2022, according to a source familiar with the transaction. The purchase was financed through a secured term loan of $6.5 billion, a revolving credit facility of $500 million, an unsecured loan of $3 billion, and $3 billion in secured loans. An investor source stated that a small group of investors was presented with the deal by the bank consortium, which also featured Bank of America (BAC.N) opening a new tab, Barclays (BARC.L) opening a new tab, Mitsubishi UFJ (8306.T), opens new tab, BNP Paribas (BNPP.PA), opens new tab, Mizuho (8411.T), opens new tab, and Societe Generale (SOGN.PA), opens new tab. The source stated they sought minimum commitments in the hundreds of millions of dollars. 

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Banks sell $5.5 billion debt of Musk.

The banks promoted the deal last week, aiming to sell the debt at 90-95 cents on the dollar but succeeded in pricing it higher at 97 cents, according to the first source. He mentioned that investors will receive a yield of 11 per cent. This is the sole recognised second effort by the banks to reduce the debt. In late 2022, efforts to sell the unsecured loan drew offers between 60 cents and the dollar, resulting in significant losses for the banks based on the debt's face value, according to the investor source. At 97 cents, it seems they sold for a profit, he stated. The Wall Street Journal previously reported on the loan's sale.

Investor Hesitation Over X’s Debt Sale Amid Musk’s Platform Changes

 Banks generally sell these loans to investors shortly after the agreement is finalised, but in X's situation, they have been unable to offload it. Musk's extensive alterations to the platform, which involved terminating numerous content moderators, along with one of his posts on X, deterred advertisers and impacted revenue. That diminished the worth of the debt since the likelihood of default grew. However, the banks felt assured about gaining more interest from investors following Trump's election win in November, and Musk's role as a close advisor to the new president was anticipated to increase traffic to the X platform. An investor who abstained from the deal mentioned that buyers probably felt more assured about the company.

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According to a previous report by Bloomberg News, one attractive feature was that investors would have access to X's investment in Musk's AI venture, xAI. Another investor source from a prominent high-yield fund manager, who was presented with the loan, stated that he turned it down since it was uncertain whether Musk's involvement was sufficiently increasing X's revenues to warrant purchasing debt with no credit ratings at 90-95 cents on the dollar. Bank of America, Barclays, BNP, Mizuho, and Societe Generale chose not to provide comments, while other banks did not promptly reply to the inquiry for a statement.