Banks sell down more X debt; just $1.3 billion now left on their books

By Shankar Ramakrishnan

(Reuters) -Banks led by Morgan Stanley have sold to investors another chunky portion of loans that formed the $13 billion debt supporting Elon Musk's $44 billion acquisition of Twitter, now X, in 2022, a source with knowledge of the deal said.

On Thursday, they completed the secondary sale of $4.74 billion of secured loans which mature in October 2029. The loans paid a fixed rate yield of 9.5% and priced at par or at 100 cents to the dollar, said the source. The loan sale was upsized from an initial $2.97 billion.

With the latest sale, the banks - that besides Morgan Stanley includes Bank of America, Barclays, Mitsubishi UFJ, BNP Paribas, Mizuho, and Societe Generale - have been able to shed almost all of the $13 billion they have been holding on their books for nearly two years.

The X acquisition was funded by a $6.5 billion secured term loan, a $500 million revolving credit facility, $3 billion unsecured loan and $3 billion of secured loans.

The timing of the sale of a balance $1.3 billion in unsecured loans still with the banks is unclear, said the source.

In early February, the banks sold $5.5 billion of a term loan which came after a separate $1 billion private sale of the same loans, the source said.

That loan was priced with a floating rate of interest at 97 cents to the dollar and an initial yield of 11%.

The latest tranche to be sold was a fixed-rate loan which is rare and the largest-ever, according to an International Financing Review report.

The first source said the deal found broad interest from large fund managers who were attracted by the prospect of improving revenues of X after Trump's election victory in November and Musk's emergence as a close aide to the new president.

Banks typically sell such loans to investors soon after the deal is done, but in the case of X, they have been stuck holding it for two years.

The first tranche of loans sold were bid higher than their 97 cents to the dollar pricing, according to one trader source, which could have helped the sale of the latest tranche.

One selling point was that investors will gain exposure to X's stake in Musk's artificial intelligence startup xAI, the source said.

Barclays, BNP Paribas, Mizuho, Societe Generale declined to comment and other banks did not immediately respond to a request for comment.

(Reporting by Shankar RamakrishnanEditing by Nick Zieminski)