US banks look to sell significant portion of the debt that financed 2022 acquisition of Twitter, now X, amidst Musk’s growing political clout

Major US banks are reportedly preparing to sell billions in debt holdings in social media platform X after lending to entrepreneur Elon Musk in 2022 to take over the company, known at the time as Twitter.

Banks lent Musk some $13 billion (£10.4bn) at the time to finance the takeover, but since then have been unable to sell the debt without taking a major loss, as X’s financials have fared poorly and the risk of default increased.

Attempts to sell the debt in late 2022 attracted bids that would have seen banks taking as much as a 20 percent loss on the face value of the debt, Reuters reported at the time.

Banks normally sell debt quickly after financing a takeover, but in this case have waited for years as they looked for a propitious moment.

Debt sale

The banks recently sold $1bn of the debt in a private transaction to several investors, the Wall Street Journal reported, citing unnamed sources.

Morgan Stanley, one of the lenders involved in the takeover, has contacted investors ahead of a planned sale this week of another tranche of up to $3bn of the debt, the report said.

The banks hope to sell the debt at 90 to 95 percent on the dollar, the report said.

The deal has been considered one of the worst undertaken by banks since the 2008 financial crisis, helping Musk pay a high $44bn for Twitter.

Musk’s moves to slash Twitter’s staff count and reduce moderation while making inflammatory remarks on the platform drove away advertisers and degraded the platform’s financial performance.

Growing interest

The entrepreneur’s recent alliance with US president Donald Trump and his influence on Trump’s administration have created more interest from investors, who have been reaching out to the banks, the Journal report said.

Investors have shown interest in buying the debt because they believe X’s financials are on an upward trajectory, according to the report.

Some of X’s equity investors have written down their holdings in the company by up to 75 percent.

Other banks that financed the Twitter buyout include Bank of America, Barclays, Mitsubishi UFJ Financial Group, BNP Paribas, Mizuho and Société Générale.