Wall Street Banks to Offload Twitter Buyout Debt
Key Points:
* Morgan Stanley and Bank of America to offer senior portions of Twitter debt
* Banks hope to recoup losses incurred from Elon Musk's acquisition
* Debt includes claim on xAI Corp., Musk's AI startup
* Improved prospects for Twitter and Musk's close ties to Trump drive investor optimism
* Banks eager to retain Musk as a client amid potential future IPOs
* Valuation of Twitter enhanced by undisclosed $6 billion stake in xAI Corp.
* Trump administration's expected regulatory rollbacks and corporate merger approvals boost dealmaking sentiment
Analysis:
Wall Street banks are seeking to offload portions of the debt extended to Elon Musk for his 2022 Twitter acquisition. The banks, including Morgan Stanley and Bank of America, are reportedly offering senior portions of the debt, which would yield investors around 90-95 cents on the dollar.
The banks initially provided $13 billion in financing for Musk's $44 billion Twitter purchase. However, the value of these loans diminished as Twitter struggled financially. The banks have been unable to offload the debt without incurring significant losses.
The sale of senior debt portions is driven by the belief that Twitter's prospects have improved due to Musk's alliance with former President Donald Trump. Additionally, banks are keen to retain Musk as a client, given his wealth and potential future business ventures.
The valuation of Twitter has also been bolstered by the disclosure of a $6 billion stake in Musk's AI startup, xAI Corp. This stake has added to investors' confidence in Twitter's long-term potential.
The Trump administration's anticipated regulatory changes and its stance on corporate mergers have further fueled optimism among Wall Street dealmakers. These factors are expected to enhance dealmaking activity throughout the year.