Musk's acquisition of Twitter for over a year will result in nearly $2 billion in losses for the banks that provided it with loans

On October 27th, it was reported that when Tesla CEO Elon Musk agreed to spend $44 billion last year to acquire X (formerly Twitter), several US banks provided $13 billion in loans to him. However, just a year later, these banks are prepared to sell off these debts, even if they bear a loss of $2 billion

On October 27th, it was reported that when Tesla CEO Elon Musk agreed to spend $44 billion last year to acquire X (formerly Twitter), several US banks provided $13 billion in loans to him. However, just a year later, these banks are prepared to sell off these debts, even if they bear a loss of $2 billion.

In October 2022, seven banks including Morgan Stanley, Bank of America, and Barclays jointly provided $13 billion in loans to Musk to help it complete its acquisition of X. These loans are secured by a portion of Tesla stock held by Musk.

Under normal circumstances, these banks would sell their debt to Wall Street investment firms shortly thereafter. But since Musk took over, investors' interest in X has gradually cooled, forcing banks to hold these debts on their balance sheets at discounted prices.

In the year after Musk acquired this social media platform, X faced many challenges. According to Apptopia's data, the download volume of this application decreased by nearly 30% between July and September. Ebiquity, a marketing consulting company that collaborates with 70 of the top 100 global advertisers, stated that only two of them advertised on X last month.

Fidelity, an asset management company that holds X shares, has lowered its valuation by two-thirds to approximately $15 billion.

According to reports, Musk's creditors have started preparing to sell off their debts.

Bankers familiar with this transaction say that due to Musk's controversial management style and shrinking advertising market, X may be given a junk bond rating, which means it has a risk of default. Even Musk himself stated last year that after he took over, X was on the brink of bankruptcy.

Before Musk took over, X's stock had already been rated junk, even though its debt was much lower at the time than it is now. Given that X stock is no longer publicly traded, it has not disclosed its financial condition. But Musk has stated that since his acquisition, X's advertising revenue has significantly decreased.

Under Musk's leadership, X reduced thousands of jobs and other costs, in part to help pay off huge debt interest. Linda Yaccarino, the current CEO of X, has stated that she expects X to achieve profitability next year.

Musk's debt includes a term loan of $6.5 billion, an average allocation of $6 billion in secured and unsecured bonds, and a revolving credit line of $500 million.

According to insiders, these banks are expected to suffer a 15% loss, totaling nearly $2 billion. For banks that hold the most debt, such as Morgan Stanley and Bank of America, this will mean losses of hundreds of millions of dollars.

X. Morgan Stanley, Bank of America, and Barclays have not yet responded to requests for comment. (Small)