Musk guarantees lenders of $13bn, dismisses concerns over X’s sinking debt
By Kingsley Odii
Banks who provided a $13 billion loan for Elon Musk’s leveraged buyout of Twitter, now known as X, are facing potential losses on the debt despite Musk’s guarantees that they would not lose any money on the deal.
According to sources familiar with the matter, Musk verbally reassured the lenders that their investment was secure even as the value of X plummeted after the acquisition.
The banks involved, including Morgan Stanley, Bank of America, Barclays, MUFG, BNP Paribas, Mizuho, and Société Générale, are now grappling to offload the debt amidst difficulties caused by Musk’s attempted withdrawal from the takeover and controversies surrounding X’s advertising practices.
Large hedge funds and credit investors have shown no interest in purchasing the debt, deeming it “uninvestable.” Selling the bonds and loans at the current market value would result in significant losses for the banks. Despite holding out hope for improved performance, there is no immediate plan to sell the debt, and it remains uncertain if the banks will be able to offload it in the coming years.
Musk’s assurances, while lacking a formal contract, have raised eyebrows given his previous attempt to renege on the Twitter deal. The guarantee, however, has allowed some banks to justify a higher valuation of the debt on their balance sheets.
The people involved in the deal cautioned that Musk’s guarantee was not based on any formal contract. One said they understood it as a boastful statement that the entrepreneur had never let his lenders down.
“I have never lost money for those who invest in me and I am not starting now,” Musk told Axios earlier this month when asked about a separate fundraising push by his company X.ai Corp.
Several people involved in the transaction noted that there was no plan to sell the debt imminently, with one saying there was no guarantee the banks would be able to offload the debt even in 2024.
Morgan Stanley recently disclosed losses tied to corporate loans, including those from the Twitter buyout. The situation compounds losses from other hung bridge loans that banks were forced to fund themselves.
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