Wall Street Banks Seek Recovery from Twitter Debt
Facing losses from financing Elon Musk's Twitter acquisition, Wall Street banks, including Morgan Stanley (MS) and Bank of America (BAC), are reportedly reaching out to investors to sell portions of the debt.
The banks are offering senior portions of the debt with a potential yield of 90-95 cents on the dollar, according to The Wall Street Journal. Bloomberg reports that the offer includes an additional incentive: a claim on X's interest in Musk's AI startup, xAI Corp.
The banks extended $13 billion in financing for Musk's Twitter buyout in October 2022. However, the loans depreciated as X's performance declined, leaving banks with significant losses on their books.
Despite these setbacks, the banks remain hopeful that selling the senior debt portions will recoup some losses. This optimism is fueled by Musk's recent alliance with President Donald Trump and the potential for future business ventures, such as SpaceX's public offering.
The news comes amid broader optimism in the financial sector following Trump's inauguration and the expectation of deregulation and merger approvals. Morgan Stanley CEO Ted Pick recently predicted a resurgence in corporate finance activity, similar to the mid-1990s.
Strong fourth-quarter earnings at major banks, including JPMorgan Chase (JPM), Goldman Sachs (GS), and Citigroup (C), provide evidence of this revival. Wells Fargo (WFC) also reported higher profits due to strong investment banking and trading results.