Morgan Stanley-led banks sell $5.5 billion of X debt on demand surge

By Sridhar Natarajan, Jeannine Amodeo and Gillian Tan

  A group of Morgan Stanley-led banks sold $5.5 billion of debt tied to Elon Musk’s social-media platform X after receiving stronger-than-expected demand from investors, according to people with knowledge of the matter. 

The banks initially planned to sell about $3 billion worth of the loan but received enough interest to parcel out additional debt. They eventually were able to sell the entire remaining slug of the highest-ranking borrowings used to fund Musk’s buyout of the platform formerly known as Twitter Inc., marking a significant milestone in their effort to free their balance sheet from the X exposure.  

The loan was priced at 97 cents on the dollar, the people said, representing a smaller discount to par than initially expected — and all but guaranteeing no losses for the banks from the largest portion of X-related borrowings. They had previously sold a $1 billion portion of the term loan last month as a way to test investor appetite. 

After the sale, big chunks of the debt were trading at 98 to 99 cents on the dollar, people familiar with the matter said. The loan matures in 2029 and carries a margin of 6.5 percentage points over the Secured Overnight Financing Rate, a relatively high rate reflecting the risks of taking on the debt. 

A spokesperson for Morgan Stanley declined to comment. X didn’t immediately respond to a request for comment.

The Wall Street firms got stuck with $13 billion of debt that Musk heaped on X during his surprise bid to take it private in 2022. While banks typically try to resell debt they commit to fund an acquisition quickly, investors balked in this case after Musk upended X’s business, laid off staff and sparked a steep revenue decline. 

Investors are now returning, drawn to the prospect of Musk-linked businesses benefiting from his relationship with President Donald Trump. The billionaire businessman used his ownership of X and his prominent perch on the platform to push for Trump’s return to the White House and now has established himself as a key adviser to the president. His growing reach across Washington has already proved to be a lightning rod, setting off criticism from Democrats warning of overreach.

For X, though, it has resulted in advertisers inching their way back onto the platform, according to bankers pitching the debt to investors. Another potential selling point is that investors will gain exposure to X’s stake in Musk’s artificial-intelligence startup xAI, which could prove to be valuable and benefit creditors down the line. 

When the acquisition closed, banks got stuck with three tranches of debt. The largest portion was a $6.5 billion term loan, meant to be sold to investors, with the rest divided up into secured and unsecured junk bonds. The banks will still have exposure to the latter portion, which may be harder to sell close to face value because it doesn’t offer the same level of creditor protections. 

The banks that underwrote the leveraged buyout have earned about $3 billion of interest income on the X debt since 2022, according to Bloomberg calculations. 

To bolster enthusiasm for the offering, Morgan Stanley shared new financials for X and hosted a meeting with some of the company’s top executives at the bank’s office in Manhattan.