Banks Divest Debt Linked to Elon Musk’s Twitter Acquisition, Marking Significant Shift in Financial Strategy

In a major development within the financial world, a consortium of banks led by Morgan Stanley has completed the sale of a significant portion of the debt tied to Elon Musk’s $44 billion acquisition of Twitter, now known as X. The deal, which involved the secondary sale of $4.74 billion in secured loans, marks a notable shift in the handling of the financial obligations related to the acquisition, originally financed in 2022.

The secured loans, which have a fixed-rate yield of 9.5% and are set to mature in October 2029, were sold at par—meaning at face value, or 100 cents on the dollar. This transaction exceeded expectations, with the banks originally planning to offload $2.97 billion in loans. As part of this latest move, banks including Bank of America, Barclays, Mitsubishi UFJ, BNP Paribas, Mizuho, and Societe Generale have now divested almost all of the $13 billion in debt they held after Musk’s acquisition.

The financing for Musk’s Twitter buyout had been structured with a mix of secured loans, unsecured loans, and a revolving credit facility. Among the various components, $6.5 billion was raised through secured debt, while another $500 million was obtained through a revolving credit facility, with an additional $3 billion in unsecured loans. To date, nearly all of this debt has been transferred to other investors, except for $1.3 billion in unsecured loans that remain on the banks’ books. The timing of the sale for this remaining debt is yet to be confirmed.

Earlier in February, the banks had sold $5.5 billion in term loans, in addition to a $1 billion private sale of similar loans. These term loans were structured with a floating interest rate and sold at 97 cents on the dollar, offering an initial yield of 11%. The latest tranche of loans, however, stands out due to its fixed-rate structure—a less common and larger offering in today’s debt market. This unusual structure, paired with the size of the transaction, drew considerable interest from large fund managers looking to capitalize on X’s potential future growth.

The motivation for this interest was driven by several factors, including X’s prospects for revenue growth amid shifting political landscapes. Notably, the changes in the political sphere following the election of President Donald Trump and Musk’s close connections with the new administration have fueled optimism about X’s financial trajectory. Moreover, investors were also intrigued by the opportunity to gain exposure to X’s role in Musk’s artificial intelligence venture, xAI, which further enhances the company’s attractiveness.

Despite the successful sale of these loans, the remaining $1.3 billion in unsecured loans represents a lingering liability for the involved banks. The timing of the sale of this debt is yet to be determined, but the pattern seen in the sale of the earlier tranches suggests that this remaining debt could be sold soon, depending on market conditions.

Historically, banks typically divest such loans shortly after a major acquisition, but in this case, they have held onto the debt for almost two years. The earlier loans, which were sold at a higher bid price than their 97 cents to the dollar valuation, likely helped set the stage for the success of this most recent sale. However, despite the positive market reception, some of the banks involved in the transactions have declined to provide further details or comment on the deal’s specifics.

As the sale of these loans concludes, attention now turns to the remaining unsecured debt, with investors and industry insiders watching closely for any further developments related to X’s evolving financial position.

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