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Wall Street banks are close to selling $3bn worth of loans backing Elon Musk’s takeover of Twitter, offloading another mammoth portion of a debt deal that has lingered on their balance sheets for more than two years.
A further disposal would come a week after bankers led by Morgan Stanley successfully sold $5.5bn of debt tied to the takeover, which they had been saddled with in 2022 after markets seized up and buyers ran for the exits.
Orders for the sale eclipsed $5bn this week, boosting the banks’ confidence that it could eliminate a discount it had initially offered on the debt. Morgan Stanley was now aiming to price the secured loans, which pay a fixed interest rate of 9.5 per cent without a discount, according to people briefed on the matter.
The sale is another coup for the seven lenders who put up roughly $13bn to finance Musk’s $44bn acquisition, which included Bank of America, Barclays, Mizuho, MUFG, Société Générale and BNP Paribas.
Wall Street lenders competed fiercely in 2022 to win a role on the hostile takeover of Twitter, now known as X. Their hope was to provide temporary financing to Musk before tapping big credit funds for the money.
However, market ructions, including the Federal Reserve’s decision to raise interest rates aggressively, and Musk’s own attempt to back out of the transaction, sparked alarm for would-be lenders.
When the deal closed, Morgan Stanley and the six other banks were forced to provide the capital themselves, hindering their ability to underwrite other loans and triggering painful losses as they wrote down the value of the loans.
But the election of Donald Trump last year and Musk’s close ties to the president have turned the tide for the banks. Investor interest in the debt rebounded, and was bolstered further by X’s stake in Musk’s artificial intelligence start-up xAI.
The sales this month, as well as $1bn of debt the lenders sold in January to hedge funds including Diameter Capital Partners, clears the vast majority of the debt the banks lent to finance the transaction. They would be left holding roughly $3bn of junior unsecured bridge loans, the people added.
The $6.5bn of term loans previously sold have rallied since trading started, with brokers on Wall Street often quoting the debt at prices between 99 and 100 cents on the dollar. That has emboldened the group of seven lenders when they considered pricing the secured loans this week.
Morgan Stanley declined to comment and X did not respond to a request for comment.
