Banks led by Morgan Stanley have recently sold a substantial portion of loans related to financing Elon Musk's venture, now known as "X." On Thursday, they concluded a secondary sale of $4.74 billion in secured loans due in October 2029. The loans carried a fixed rate yield of 9.5% and were sold at par, an increase from the initial $2.97 billion intended for sale.
In conjunction with Morgan Stanley, other banks involved in the sale included Bank of America, Barclays, Mitsubishi UFJ, BNP Paribas, Mizuho, and Societe Generale. This sale marked progress in reducing the banks' exposure to the $13 billion debt held for almost two years.
The financing for "X" comprised a $6.5 billion secured term loan, a $500 million revolving credit facility, $3 billion in unsecured loans, and $3 billion in secured loans. The timing for the sale of the remaining $1.3 billion in unsecured loans remains uncertain.
Earlier in February, the banks unloaded $5.5 billion, following a separate $1 billion private sale of comparable loans. Notably, a loan in this batch was structured with a floating interest rate at 97 cents to the dollar and an initial yield of 11%.
The recent sale of the fixed-rate loan, considered the largest ever of its kind, found significant interest from substantial fund managers seeking to benefit from "X's" potential revenue growth post the US elections.
While typical practice sees banks offloading such loans shortly after the deal, the unique circumstances surrounding "X" resulted in the banks retaining them for two years. The successful sale of the earlier tranche at a premium over its initial pricing likely facilitated the current transaction.
One point of attraction for investors was the opportunity to gain exposure to "X's" stake in Musk's artificial intelligence startup "xAI."
Societe Generale opted not to provide a comment, and other banks were not immediately available for comment.