Elon Musk Offers Verbal Assurances to Banks Amidst X Debt Woes - The Top Society

Elon Musk Offers Verbal Assurances to Banks Amidst X Debt Woes

Elon Musk, the entrepreneur known for his ventures such as SpaceX and Tesla, has reportedly given verbal assurances to banks that lent him $13 billion for the leveraged buyout of Twitter, now rebranded as X. The reassurances were intended to allay concerns among lenders as the social media platform’s business faced challenges, resulting in a significant drop in its value post-acquisition.
The seven banks involved in the loan agreement — Morgan Stanley, Bank of America, Barclays, MUFG, BNP Paribas, Mizuho, and Société Générale — are now confronting substantial losses on the debt, despite Musk’s assurances. The decline in X’s business, exacerbated by Musk’s controversial actions, has hindered the banks’ efforts to sell the debt.
Sources familiar with the matter noted that hedge funds and credit investors offered to purchase the senior-most portion of the debt at approximately 65 cents on the dollar late last year. However, in recent interviews, several investors stated that they would not consider buying the bonds and loans at any price, citing uncertainties about X’s ability to turn the business around.
Some described X’s debt as “uninvestable,” underscoring the skepticism surrounding the platform’s financial viability. Selling the $12.5 billion of bonds and loans below 60 cents on the dollar, a challenging prospect in the current market, would lead to significant losses for the banks.
The debt includes $6.5 billion in term loans, $6 billion in senior and junior bonds, and a $500 million revolver. The banks have chosen to hold the debt on their balance sheets, hoping for a potential improvement in X’s performance following cost-cutting measures.
Despite Musk’s verbal guarantees, sources caution that there is no imminent plan to sell the debt, and there is no assurance that the banks will be able to offload it, even in 2024. Musk’s guarantees are reported to be informal and not based on any formal contract, with some viewing them skeptically given his previous attempts to back out of the Twitter acquisition.
Musk‘s recent actions, including controversial statements and endorsements, have led to a decline in X’s business. A report from market intelligence firm Sensor Tower revealed a nearly 45% decrease in total U.S. ad spend among the top 100 advertisers on X in November 2023 compared to October 2022, before Musk’s takeover.
Morgan Stanley, the largest lender in the deal, disclosed $356 million in mark-to-market losses on corporate loans related to X in January. While losses tied to individual bonds or loans are rarely reported by banks, the difficulties surrounding X’s business have kept the debt’s market value a subject of speculation on Wall Street.
Banks involved in the deal declined to comment, as did a spokesperson for X. Musk did not respond to requests for comment on the matter. The situation highlights the challenges faced by financial institutions as they grapple with the aftermath of a high-profile acquisition in a rapidly evolving digital landscape.
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