Four banks hold 90% of X's debt.
Bloomberg reports a group of banks, led by Morgan Stanley, is preparing to sell up to $3 billion of senior debt tied to Elon Musk's acquisition of X, at 90-95 cents on the dollar. This compares favorably with previous attempts to sell the debt in late 2022 right after its purchase, when it was priced at 20% discount to face value.
Bankers contacted a "select group of investors"—likely pensions funds and SWF's— to gauge interest in purchasing chunks of at least $250 million at a time.
The banks, which recently offloaded about $1 billion to multiple investors in a private transaction, plan to hold on to X/Twitter's more junior debt for the time being.
When Musk bought Twitter, he and co-investors put up $33.5 billion of equity, even though Musk said in October 2022 that he and his other investors were "obviously overpaying for Twitter." Despite this, seven banks, including Morgan Stanley, Bank of America, and Barclays, still approved the loans, and put $12.5BN in three tranches of debt
- $6.5 billion meant to be sold to investors as senior secured leveraged loans.
- Two $3 billion tranches meant to be replaced by secured and unsecured junk bonds.
—and which they've been stuck with since!
Recent improvements in X's financial performance and its increased relevance during the 2024 presidential election have potentially improved the debt's marketability, allowing banks to consider selling at the more modest discount of 5-10%.
Nevertheless, as of last fall —before Trump's victory—in its latest disclosure , Fidelity's Blue Chip Growth Fund valued X at only $9.4 billion, a staggering 79% drop from its purchase price in 2022.
See the article on Bloomberg here:
More on the story from perplexity.ai here:
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