Morgan Stanley (MS) is offloading the final $1.23 billion of debt tied to Elon Musk’s (TSLA) $44 billion acquisition of Twitter, now rebranded as X, in a fixed-rate loan offering at 9.5% interest and a discounted price of 97.5-98 cents on the dollar. The sale concludes nearly two years of exposure for the bank to one of the most scrutinized leveraged buyouts in tech history.
Other major lenders—including Bank of America, Barclays and Mitsubishi UFJ—participated in the original financing package, which comprised a $6.5 billion secured term loan, a $500 million revolver, a $3 billion unsecured facility and $3 billion in secured debt. Banks have gradually shed their commitments as Musk’s close ties to political figures and signs of improving revenue at X bolstered confidence.
Market Overview:- Morgan Stanley offers last $1.23 billion of X acquisition debt at 9.5% fixed rate.
- Debt priced at 97.5-98 cents on the dollar to facilitate rapid offload.
- Original financing included a mix of secured, unsecured and revolving credit.
- Bank of America (BAC), Barclays (BCS) and Mitsubishi UFJ were among the initial lenders.
- Exposure reduction reflects lenders’ response to X’s evolving revenue prospects.
- Deal marks an endpoint for nearly $13 billion of leveraged financing risk.
- Morgan Stanley will report its Q1 results on Wednesday, with loan sales under scrutiny.
- X’s long-term credit profile will depend on its ability to monetize new AI ventures.
- Investor focus will shift to how banks manage residual exposure to tech buyouts.
- Morgan Stanley’s successful sale of the final $1.23 billion in X acquisition debt at a 9.5% fixed rate and a modest discount (97.5-98 cents on the dollar) demonstrates renewed investor appetite for leveraged tech loans, even amid market volatility[1][3][4].
- The completion of this transaction allows Morgan Stanley and other major lenders (Bank of America, Barclays, Mitsubishi UFJ) to fully exit a high-profile, high-risk exposure, freeing up capital for new opportunities and reducing balance sheet risk[1][3][5].
- Improving revenue prospects at X, along with Elon Musk’s influential political connections, have boosted confidence in the platform’s long-term viability, supporting the ability to offload nearly all of the original $13 billion in debt[1][3][6].
- The loan is being added to an existing tranche that is reportedly trading near par, suggesting that the market views the credit risk as manageable and that the deal is being executed at relatively favorable terms[4].
- This deal could set a positive precedent for future leveraged finance transactions in the tech sector, especially for banks looking to manage risk in complex, politically sensitive deals[6].
- The need to offer the debt at a discount and a high 9.5% interest rate underscores lingering concerns about X’s creditworthiness and the risks associated with Musk’s high-profile, debt-laden acquisition[1][3][4].
- Market volatility and previous difficulties in offloading the debt highlight ongoing investor caution toward large, leveraged buyouts in the tech sector, particularly those tied to unpredictable management or political factors[2][4].
- While most of the $13 billion in debt has been sold, the process took nearly two years, indicating limited liquidity and appetite for such risk, which could deter banks from underwriting similar deals in the future[1][2][5].
- X’s long-term credit profile remains uncertain, as future monetization of AI ventures and operational improvements are not guaranteed, leaving residual risk for new debt holders[3].
- The transaction’s outcome may prompt tighter lending standards and more conservative structuring for future tech buyouts, especially in environments marked by political and revenue uncertainty[2][6].
The transaction underscores Wall Street’s appetite to exit high-profile leveraged loans amid volatile market sentiment. Morgan Stanley’s decision to finalize this sale reflects a broader trend of banks trimming risk in complex technology deals.
Looking forward, the swift execution of this debt offering could inform how lenders approach future leveraged finance opportunities, especially in sectors where political and revenue uncertainty intersect.
