Morgan Stanley sets $3 billion X loan to tap into Elon Musk mania

By Jeannine Amodeo, Sridhar Natarajan and Gillian Tan 

Morgan Stanley kicked off another large sale of X Corp. debt on Monday, seizing on investors’ sudden embrace of the social-media platform owned by billionaire Elon Musk due to his close ties to the White House. 

The Wall Street firm is pitching investors on nearly $3 billion worth of loans that it holds along with other banks. The move comes less than a week after it sold $5.5 billion in X debt amid strong demand from buyers, according to people with knowledge of the matter.

 

The sales mark a surprising turnaround for what had initially been seen as an ill-fated financing of Musk’s 2022 takeover of Twitter Inc., as the site was then called. Banks led by Morgan Stanley were left with billions of dollars of the company’s debt when investors balked at buying it, concerned about the price he paid and that his changes to content-moderation policies would drive away advertisers.

 

 

But his close ties to President Donald Trump have swiftly changed the market’s view of X’s prospects even as Musk’s aggressive government cost-cutting efforts sow upheaval in Washington. That’s given banks an opportunity to sell off debt tied to the takeover.

 

In its marketing pitch for the prior sale, Morgan Stanley showed investors details of X’s earnings and revenue that, while heavily adjusted, suggested that the company’s finances had stabilised, due in part to a bump in advertising around the election.

 

The bank also promoted X’s stake in Musk’s artificial intelligence project, xAI, as something that could benefit investors down the line. On Monday, Musk reportedly shepherded an unsolicited $97.4 billion bid for xAI’s main rival, OpenAI, suggesting that he has much grander ambitions for that area of his business empire.

 

Demand for X’s debt allowed Morgan Stanley to scale up the size of its previous offering and price it closer to par value than initially expected. The current chunk of debt being offered is expected to price even higher — at 98 cents or more on the dollar — and pay an interest rate of 9.5 per cent, said the people, who were not authorised to discuss the transaction publicly.

 

Proceeds will be used to repay an existing first-lien, secured bridge loan stemming from the buyout, they said. The sale is expected to happen later this week.

 

Wall Street banks led by Morgan Stanley got stuck with a total of $13 billion in debt that Musk heaped on X during his surprise bid to take it private. Investors shunned the debt after Musk upended X’s business, laid off staff and sparked a steep revenue decline. Some funds were offering to buy it for as little as 60 cents on the dollar shortly after the transaction, among the steepest markdowns in a decade.

 

In addition to the $5.5 billion loan sold last week, a $1 billion portion of the debt was offloaded last month to test investor appetite.

 

A representative for Morgan Stanley declined to comment. The bank advised Musk on his purchase of Twitter, led the financing arrangements and took on the biggest portion of debt. Other holders include Bank of America Corp., Barclays Plc, Mitsubishi UFJ Financial Group Inc., BNP Paribas SA, Mizuho Financial Group Inc. and Societe Generale SA.