Sources: X covered some losses usually borne by banks when seven lenders, including Morgan Stanley, sold $1.2B of its debt at 98 cents on the dollar in April
Financial Times : X: @tanarrowz and @markbohlund X: @tanarrowz : “He'll never let Twitter [X] fail,” a banker involved in the deal said. “I don't think people even did their credit work. They just trusted the Musk halo.” https://www.ft.com/... via @ft Mark Bohlund / @markbohlund : Good article but perplexed about who bought this steaming pile of💩. “Morgan Stanley's 1Q earnings were bolstered by the debt sales, with the US lender reporting nearly $700mn of “other” revenues with much of the boost related to selling X debt”. https://www.ft.com/...
Context & Ripple Effects
Banks had been working down the financing from Musk's takeover for years, constrained earlier by X's weak performance and higher rates. In February, they sold roughly $4.7B of the debt, leaving about $1B on their balance sheets.
The April transaction was previously reported as the final $1.2B sale at 98 cents on the dollar. This account adds that X absorbed some losses normally borne by lenders, clarifying how the last placement was made palatable.
First-order effects
- X takes on part of the economic cost of discounting the $1.2B debt sale, while the seven lenders, including Morgan Stanley, complete the disposal of the remaining exposure.
- Morgan Stanley's first-quarter results benefit from debt-sale-related revenue, reducing the visible drag from financing the takeover.
Second-order effects
- The arrangement gives buyers a clearer price and shifts part of the execution risk from banks to X, potentially making a difficult debt placement easier to complete.
- Other banks underwriting highly leveraged transactions may place greater weight on borrower support when market pricing would otherwise crystallize losses.
Third-order effects
- If repeated, such loss-sharing could blur the usual boundary between borrower and lender risk in stressed acquisition financings, making headline loan-sale prices an incomplete measure of bank economics.
- The episode underscores how concentrated sponsor-backed debt can remain on bank balance sheets until a bespoke exit structure—not simply an improving credit profile—opens a distribution window.
The trend: This is one data point in the gradual unwinding of hung leveraged-buyout debt through tailored risk-sharing rather than straightforward secondary-market sales.