Banks Offload Another Large Chunk of Musk’s $13 Billion Twitter Buyout Loans
(Reuters) – A consortium of banks, led by Morgan Stanley (NYSE: MS), has successfully sold an additional $4.74 billion in loans tied to Elon Musk’s $44 billion acquisition of Twitter (now X), reducing their exposure to one of the most challenging debt financings in recent years.
The secondary loan sale, which was completed on Thursday, is part of a broader effort by financial institutions to divest nearly $13 billion in debt they had been holding since Musk’s 2022 takeover of Twitter. These loans, originally structured to finance the acquisition, have been slow to move in the market due to X’s uncertain financial outlook and market volatility.
With this latest transaction, the banks—including Bank of America, Barclays, Mitsubishi UFJ, BNP Paribas, Mizuho, and Société Générale—have significantly reduced their exposure, leaving only $1.3 billion in unsecured loans still on their books.
Details of the Latest Loan Sale
1. $4.74 Billion in Fixed-Rate Loans Sold at 9.5% Yield
🔹 The latest sale involved secured loans maturing in October 2029.
🔹 The fixed-rate yield was set at 9.5%, with the loans priced at par (100 cents on the dollar).
🔹 The initial offering was $2.97 billion but was later upsized to $4.74 billion due to strong demand.
This marks a significant step in the banking group’s efforts to unload the remaining debt from Musk’s highly leveraged buyout of Twitter.
2. Loan Sales Timeline and Previous Transactions
📌 February 2024:
✅ Banks sold $5.5 billion of a secured term loan.
✅ The loan was priced at 97 cents on the dollar with an initial floating-rate yield of 11%.
📌 Prior to February:
✅ A $1 billion private sale of the same loans was completed.
The latest tranche—a fixed-rate loan structure—is uncommon in such deals and is reportedly the largest-ever fixed-rate leveraged loan sale, according to the International Financing Review (IFR).
Why Banks Have Been Holding the Debt for Two Years
🔹 Unusual Holding Period: Typically, banks sell leveraged buyout (LBO) debt soon after a deal closes. However, in this case, the X (Twitter) acquisition debt was difficult to offload due to:
✅ X’s financial instability following Musk’s takeover.
✅ Uncertainty in advertising revenue after Musk’s changes to the platform.
✅ Investor skepticism over X’s profitability.
🔹 Recent Investor Interest Driving Demand:
✅ Improved revenue projections for X following Donald Trump’s election victory in November 2024.
✅ Musk’s rising influence in U.S. politics attracting investors.
✅ New opportunities for X through its investment in artificial intelligence startup xAI.
“One selling point was that investors will gain exposure to X’s stake in Musk’s AI startup xAI,” said a source familiar with the deal.
What’s Next for the Remaining $1.3 Billion in Loans?
The remaining portion of unsecured loans—worth $1.3 billion—has yet to be sold, and its timing remains uncertain.
📌 Challenges Ahead:
✅ These loans are unsecured, making them riskier than the secured debt that has already been sold.
✅ Investors may demand higher yields due to X’s mixed financial performance.
✅ Market conditions and investor sentiment will play a key role in pricing.
What This Means for X and Financial Markets
1. Strengthening X’s Financial Position
📌 Banks unloading debt reduces financial strain on X’s ownership structure.
📌 X’s ability to attract investors at competitive rates suggests improving market confidence.
2. Implications for AI Investments
✅ The deal highlights investor interest in Musk’s AI ambitions, especially through xAI.
✅ As AI investments grow, X could leverage its stake in xAI to attract more funding.
3. Impact on Financial Institutions
✅ Banks like Morgan Stanley, Barclays, and Bank of America will now have less risk exposure.
✅ Successful loan sales may restore confidence in underwriting large leveraged buyouts.
Final Thoughts
The $4.74 billion loan sale marks a major step in reducing Wall Street’s exposure to Musk’s highly leveraged Twitter buyout. While the banks have successfully offloaded nearly all secured debt, the remaining $1.3 billion in unsecured loans presents a lingering challenge.
With X’s revenue prospects improving and Musk’s AI ventures gaining traction, investor sentiment is shifting. However, market volatility and business performance will determine how quickly the remaining debt is sold.
For latest Business and Finance News subscribe to Globalfinserve, Click here.