Efforts to offload debt on Musk’s 2022 $44 Billion Buyout Face Challenges Amid Declining Platform Value
Wall Street banks are preparing to sell up to $3 billion in loans tied to Elon Musk’s $44 billion acquisition of X, the social media platform formerly known as Twitter. This move follows difficulties in offloading the debt after Musk’s acquisition in 2022. Major financial institutions, including Morgan Stanley, Bank of America, and Barclays, had lent Musk funds to help close the deal, but have struggled to find buyers for the loans amid challenges facing the platform.
According to sources familiar with the matter, Morgan Stanley has already begun reaching out to potential investors in preparation for the sale, which is scheduled for next week. The banks are anticipating a return of 90 to 95 cents on the dollar for the loans. The debt had been issued as part of the funding for Musk’s high-profile purchase of the platform, which has since undergone drastic changes under his leadership.
Musk’s restructuring of the company, including significant layoffs and policy changes, has caused advertisers to pull back, directly impacting the platform’s revenue. This has led to a decline in the value of the debt, as the risk of default has grown. In late 2022, early attempts to sell the loans drew bids that would have resulted in the banks taking a loss of up to 20% of the debt’s original value.
Despite the challenges, Musk’s high profile and political ties have fueled optimism among banks, with some sources suggesting that his close relationship with former President Donald Trump could potentially improve the platform’s fortunes and help the banks avoid a massive loss on their investment.
Other institutions in the consortium that helped finance Musk’s purchase of Twitter include Mitsubishi UFJ, BNP Paribas, Mizuho, and Societe Generale.
As the banks move forward with the sale, the future of X remains uncertain, with Musk’s leadership continuing to spark both criticism and speculation about the platform’s long-term viability. The success or failure of the debt sale will be closely watched by investors and financial experts alike, as it may offer a window into the broader impact of Musk’s acquisition on both the platform and the financial world.
