- Led by Morgan Stanley (MS), banks have sold $4.74 billion of secured loans from the $13 billion debt used for Elon Musk’s acquisition of X, priced at par with a fixed yield of 9.5% and maturing in 2029.
- This sale follows earlier transactions in February where $5.5 billion of loans were sold, indicating a gradual reduction of banks’ exposure to the X acquisition debt, with $1.3 billion in unsecured loans still unsold.
- Investor interest in these loans was driven by expectations of increased X revenues post-Trump’s election, Musk’s political influence, and the prospect of exposure to xAI, Musk’s AI startup.
Reuters reports that Morgan Stanley (MS), along with other major banks including Bank of America (BAC), Barclays (BCS), Mitsubishi UFJ, BNP Paribas, Mizuho, and Societe Generale, have significantly reduced their exposure to the $13 billion debt amassed during Elon Musk’s $44 billion acquisition of Twitter, now known as X, in 2022. They successfully offloaded $4.74 billion in secured loans on Thursday, which now mature in October 2029, with a fixed rate yield of 9.5% priced at par value. This sale was an expansion from the originally planned $2.97 billion, showcasing strong investor interest.
The sale of these loans comes after a series of transactions aimed at offloading the debt burden. Earlier in February, the banks managed to sell $5.5 billion of a term loan, following a $1 billion private sale. That term loan was sold at 97 cents on the dollar with an initial yield of 11%, reflecting a floating rate of interest. The latest tranche, however, as noted by the report, was unique as it was a fixed-rate loan, described by the International Financing Review as the largest of its kind ever.
The banks’ ability to sell these loans at par or near par value after holding them for nearly two years is noteworthy, especially considering the initial skepticism surrounding X’s financial stability due to Musk’s sweeping changes to the platform’s operations and content moderation policies. However, investor confidence appears to be supported by several factors. One significant influence is Musk’s newfound political proximity to President Donald Trump, post-election in November, which is expected to potentially increase traffic and engagement on X. Additionally, the sale was attractive due to the prospect of gaining exposure to X’s investment in Musk’s AI venture, xAI.
Despite these sales, there remains an outstanding balance of $1.3 billion in unsecured loans still held by the banks, with no clear timeline for their sale. This situation reflects the complex nature of managing high-profile acquisition debt, where market conditions, company performance, and political landscapes can dramatically affect investment attractiveness. The broad interest from large fund managers in these latest sales underscores a growing optimism about X’s revenue prospects and its strategic position in the tech and social media landscape, influenced by Musk’s broader business and political engagements.
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