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Wall Street banks are on the verge of wrapping up a deal to sell $3 billion in loans linked to Elon Musk’s acquisition of Twitter, moving another hefty chunk of a loan package that’s lingered on their books for more than two years.
This potential sale would come hot on the heels of a recent success by a team of bankers led by Morgan Stanley, who managed to offload $5.5 billion of debt associated with the acquisition. This particular debt had become a burden back in 2022 when the markets went into turmoil and investors retreated.
This week has seen a surge of interest, with orders exceeding $5 billion, giving banks the optimism they needed to eliminate the discounted rates they had first set. Sources close to the matter shared that Morgan Stanley is looking to sell these secured loans at a fixed interest rate of 9.5 percent, minus any markdown.
This progress marks a significant win for the group of seven banks, which also includes Bank of America, Barclays, Mizuho, MUFG, Société Générale, and BNP Paribas. These institutions initially pooled together about $13 billion to bankroll Musk’s $44 billion Twitter buyout.
Back in 2022, Wall Street banks were vying fiercely to secure a role in what was considered a hostile takeover of Twitter, now rebranded as X. Their strategy was simple: offer Musk temporary funding before turning to major credit funds to raise the necessary capital.
However, tumultuous market conditions, notably the Federal Reserve’s unyielding interest rate hikes, coupled with Musk’s own wavering on the deal, created panic among prospective lenders.
As the dust settled and the deal finalized, Morgan Stanley and their partners had to dip into their own resources to provide the financing. This decision constrained their capacity to extend credit elsewhere and forced them to take heavy losses as they reduced the loans’ book value.
Nevertheless, last year’s election victory for Donald Trump and Musk’s cordial relationship with the former president have revitalized interest for these banks. Investor enthusiasm has seen a resurgence, further amplified by X’s involvement in Musk’s AI venture, xAI.
With the sales this month and an earlier $1 billion debt sale to hedge funds like Diameter Capital Partners in January, these banks have nearly cleared out the bulk of the financing they provided for Musk’s takeover. According to sources, they now hold around $3 billion in junior unsecured bridge loans.
The previously sold $6.5 billion in term loans have seen a rally since trading began, with Wall Street brokers frequently valuing the debt at nearly face value. This has given the consortium of seven banks the confidence to set higher prices on the secured loans this week.
Morgan Stanley did not comment on the situation, and representatives from X also chose not to respond to requests for comment.
