Wall Street Banks Move to Sell $3 Billion in Loans to Facilitate Elon Musk’s Twitter Acquisition
Wall Street banks are nearing the sale of $3 billion in loans that were initially extended to finance Elon Musk’s acquisition of Twitter, now rebranded as X. This development represents a significant step toward unwinding a considerable portion of the debt that has lingered on their books for over two years.
This sale follows the recent achievement of a syndicate of bankers, led by Morgan Stanley, which successfully divested $5.5 billion in debt linked to the acquisition. This debt, carried on the balance sheets since 2022, faced challenges due to market volatility and investor apprehension.
Demand for the latest loan offering has surged, surpassing $5 billion this week, which has bolstered the banks’ confidence in shedding the discounts initially placed on these debts. Sources indicate that Morgan Stanley is now looking to price the secured loans at a fixed interest rate of 9.5% with no discounts.
This transaction marks another success for the consortium of seven lenders that provided approximately $13 billion to fund Musk’s $44 billion acquisition, which includes major players like Bank of America, Barclays, Mizuho, MUFG, Société Générale, and BNP Paribas.
In 2022, Wall Street banks aggressively vied for roles in what was considered a hostile takeover of Twitter, intending to provide interim financing to Musk before transitioning to larger credit facilities.
However, market turbulence, driven by the Federal Reserve’s aggressive interest rate hikes and lenders’ hesitance to proceed with the deal, created significant concerns among potential financiers.
At the closure of the acquisition, Morgan Stanley and its six counterparts were compelled to conserve capital, which restricted their ability to fund additional loans and led to substantial losses due to a markdown of the loan values.
Recent developments, including the election of Donald Trump and the broader implications of the administration’s policies, have shifted the landscape favorably for banks. There has been a renewed investor interest in the debt, especially as X explores investments in the artificial intelligence sector through its new venture, Xai.
With this month’s sales, complemented by the $1 billion in debts sold in January to hedge funds such as Diameter Capital Partners, a significant portion of the financing provided for the acquisition has exited bank portfolios. The outstanding balance now consists of $3 billion in unguaranteed bridge loans, according to insider reports.
Loans totaling $6.5 billion have seen a rebound in value since trading commenced, typically exchanging between 99 and 100 cents on the dollar. Such price performance has infused further confidence among the seven lenders regarding the pricing of secured loans this week.
Morgan Stanley declined to comment on the matter, and X has not responded to inquiries regarding the situation.
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