Wall Street banks have sold almost all $12.5bn of debt tied to Elon Musk’s Twitter purchase

I am not a fan of Elon, but am interested in the Twitter (yes, I said Twitter) Saga and this is something I was reading this morning (link here)

10 Key Takeaways from the Article

Wall Street Banks Have Offloaded Nearly All of X’s Debt – Banks led by Morgan Stanley have sold almost all of the $12.5bn debt tied to Elon Musk’s Twitter/X acquisition.

Strong Demand for the Loans – The latest sale totalled $4.74bn, exceeding the initial plan of $3bn, with $12bn in investor orders, highlighting a shift in market sentiment.

Investor Perception Changed After Trump’s Election Victory – Since Trump’s win, investors reassessed the risk level of X’s debt, increasing demand significantly.

Loans Are Trading Above Face Value – Blocks of the loans are trading at 101-102 cents on the dollar, reflecting increased confidence in X’s financial position.

Banks Initially Rejected Steep Discounts – Lenders declined offers at 75-80 cents on the dollar in 2023-2024, betting on an eventual turnaround at X.

xAI Stake Helped Boost X’s Valuation – Musk’s decision to give X a stake in his AI start-up enhanced its perceived value, improving security for debt holders.

Banks Have Gradually Sold the Debt – In January, Morgan Stanley sold $1bn of debt, followed by $5.5bn in February, before fully offloading loans this week at full price.

X Terminated a $500mn Revolving Credit Facility – As part of the latest debt restructuring, X cancelled its $500mn credit facility with the seven banks.

Unsecured Debt Sale Still Pending – The riskiest portion, over $1bn in unsecured loans, remains to be sold, offering higher interest but carrying more default risk.

Banks May Refinance or Market the Remaining Debt – Morgan Stanley and the six other banks are considering marketing or refinancing the final portion as preferred equity.

Implications for Cash Management & Allocation

The sale of X’s debt highlights shifts in investor risk appetite and strategic debt management. The banks' decision to hold out for better prices rather than selling at steep discounts protected cash flow and minimised losses. Meanwhile, X’s move to cancel a $500mn revolving credit facility suggests it is trying to reduce reliance on short-term borrowing, signalling an effort to stabilise its finances.

For X, securing higher valuations for its loans and attracting investor confidence provides greater flexibility in future cash allocation. However, the remaining $1bn in unsecured debt presents a liquidity challenge, as it carries greater risk and could impact X’s financial position if not successfully managed.

How Would This Impact a Company Experiencing the Same Situation?

A company in a similar position would need to:

Optimise Debt Sales Timing – Selling debt at the right time (as Morgan Stanley did) maximises value and minimises losses.

Enhance Asset Valuation – Improving perceived company value (like Musk’s xAI stake move) boosts investor confidence.

Exit Costly Credit Facilities – Reducing unnecessary credit lines (like X’s $500mn facility) improves cash flow.

Balance Secured & Unsecured Debt – Ensuring a mix of secured and unsecured loans to manage financial risk.

Explore Refinancing Options – Using preferred equity or restructuring debt to secure more favourable terms.