Morgan Stanley Boosts X Debt Sale as Investors Embrace Musk Bet

Morgan Stanley is gearing up to sell a significant portion of debt tied to Elon Musk's acquisition of X, formerly known as Twitter, in a move that could alleviate some financial burden from the banks involved. The debt sale, expected to launch next week, will offer the loans at a discounted price of 90 to 95 cents on the dollar, reflecting market conditions and investor appetite for discounted debt offerings.

The consortium of banks, led by Morgan Stanley, includes Bank of America and Barclays, and has been holding onto approximately $13 billion in debt since financing Musk's $44 billion acquisition of X in 2022. The banks have struggled to offload the debt amid volatile market conditions, but an earlier sale of $1 billion of the debt in a private transaction to multiple investors this year suggests that there is interest in the debt market.

The discounted pricing of the debt reflects the challenges in marketing the debt, as investors are likely to scrutinize the offering given the risks associated with X's uncertain financial trajectory under Musk. The banks' inability to offload the debt at a higher price suggests that investors are concerned about the company's financial stability and its ability to meet future debt obligations.

However, the growing interest from investors in purchasing X's debt indicates that there is a belief that the company's financials are showing signs of improvement. This interest is likely driven by a combination of factors, including Musk's increasing influence and alliance with President Trump, which has positively impacted the narrative around X's financial prospects. Additionally, the discounted pricing of the debt makes it more attractive to investors, as they can purchase it at a lower cost than its face value.

The proposed sale of $3 billion in senior debt tied to Elon Musk's acquisition of X at a discounted price (90-95 cents on the dollar) represents a significant step for the banks to alleviate their balance sheet burdens. This sale could set a positive precedent for future leveraged buyout debt transactions, as investors may be more willing to purchase debt from companies with similar financial profiles.



The banks' efforts to offload the debt come at a time when credit markets are increasingly selective, creating challenges for firms seeking to shift exposure to leveraged buyouts. Investors are likely to scrutinize the offering, given the risks associated with X's uncertain financial trajectory under Musk. The discounted pricing underscores the difficulty of marketing such debt, but if successful, the sale could alleviate some pressure on the banks' balance sheets.

In conclusion, Morgan Stanley's boost to the X debt sale reflects the growing investor interest in purchasing discounted debt offerings, driven by a combination of factors including Musk's influence and the company's improving financials. The banks' ability to offload a portion of the $13 billion debt package could reduce exposure to one of the most challenging merger-finance deals since 2008, stabilizing their financial performance. However, the discounted pricing and the remaining junior debt holdings highlight the ongoing challenges in the credit markets and the need for banks to navigate other portions of the debt package.