Major Wall Street banks are close to selling $3 billion worth of loans that were extended to Elon Musk to finance his purchase of Twitter in 2022. This will allow them to get rid of another significant part of the debt that has been hanging on their balance sheets for more than two years.
This was reported by the Financial Times , UNN and UNN.
Details
The new sale comes a week after a group of banks led by Morgan Stanley successfully sold $5.5 billion of debt associated with the deal. Demand for the loans was strong, with the total number of orders exceeding $5 billion, allowing the banks to reduce the previously proposed discount.
Morgan Stanley plans to price the secured loans at a fixed interest rate of 9.5%, with no discount. The sale was another success for the seven lenders who invested about $13 billion to finance Musk's $44 billion purchase of the social network, including Bank of America, Barclays, Mizuho, MUFG, Société Générale and BNP Paribas.
In 2022, Wall Street lenders were in a fierce battle to participate in the hostile takeover of Twitter, now known as X. They hoped to provide Musk with temporary funding before raising large loan funds to get the money.
However, market turmoil, including the Federal Reserve's decision to sharply raise interest rates and Musk's own attempt to withdraw from the deal, has caused potential lenders to be concerned.
Following the closing of the Morgan Stanley deal, the six other banks were forced to provide capital on their own, which limited their ability to underwrite other loans and resulted in significant losses as they drove down the value of their loans.
But Donald Trump's election victory last year and Musk's close ties to the president turned the tide for banks. Investors' interest in debt has resumed and was further bolstered by X's stake in Musk's artificial intelligence startup xAI.
This month's sales, as well as $1 billion of debt that lenders sold in January to hedge funds including Diameter Capital Partners, repaid most of the debt that banks provided to finance the deal.
They will reportedly be left with about $3 billion in unsecured loans.
Recall
Earlier, UNN wrote that Wall Street banks are preparing to sell most of their debt assets on the social media platform X. In particular, they are seeking to sell “senior” debt obligations at a price of 90-95 cents per dollar, while retaining “junior” assets.