Wall Street banks are preparing to sell multibillion-dollar debts to Musk's social network - WSJ
Kyiv • UNN
Banks plan to sell most of the debt assets of X (formerly Twitter) at 90-95 cents per dollar. The sale of $3 billion of debt is an attempt to minimize losses from the $44 billion deal with Musk.
Wall Street banks are preparing to sell most of their debt assets to X, a social media platform owned by billionaire Elon Musk. This was reported by The Wall Street Journal, according to UNN.
Details
Morgan Stanley bankers reportedly approached investors ahead of a planned sale of up to $3 billion worth of debt that the bank and other banks, such as Bank of America and Barclays, lent Musk to buy back the company formerly known as Twitter in 2022.
Banks are looking to sell senior debt at 90-95 cents per dollar, while keeping junior assets. They have recently sold about $1 billion of debt in a private transaction to several investors.
The debt sale deal is an important step for the banks. They lent Musk about $13 billion to help pay for the deal. The $44 billion Musk paid for Twitter was high even at the time of the purchase, and the company's volatile performance has reduced its value.
The deal is considered one of the worst that banks have agreed to finance since the 2008 financial crisis.
To sell the debt, bankers will have to convince investors that the company's financial performance has stabilized. Musk's recent rise to power and his alliance with U.S. President Donald Trump seem to have helped change the narrative about the fate of X, the publication writes.
It is reported that investors have approached banks and expressed interest in buying the company's debt, as they believe that its financial performance is showing an upward trend.
In a January email to employees, Musk pointed to the company's growing influence and power, but said that finances remained problematic.
"Our user growth is stagnating, our revenues are not impressive, and we are barely breaking even," the letter says.
Banks were waiting for a favorable moment to sell X's debt to minimize possible losses. In the meantime, X's creditors, such as Mitsubishi UFJ Financial Group, BNP Paribas, Mizuho, and Société Générale, are receiving high interest payments on their loans.
Loans to companies such as X typically pay a few percentage points more than the benchmark rate for an investment grade loan.
After Musk bought Twitter, major advertisers left the company, and its profits fell. However, the company's financial performance is improving as some brands have started spending money on the platform again.
In his email to employees, Musk noted with hope the company's current growth.
"Over the past few months, we've witnessed the power of X to shape national discussions and outcomes," Musk wrote. "We're also seeing other platforms begin to embrace our commitment to free speech and unbiased truth," Musk said.
According to media reports, Musk may be alluding to Meta Platforms' recent decision to abandon fact-checking and adopt a user-driven community note system similar to that of X.
Recall
Trump announced that he is ready to conclude a deal to sell TikTok, where half of it will be owned by the United States. Potential buyers include Elon Musk, Larry Ellison, and other American investors.