Musk’s $44-B Twitter Deal - Lenders Hold On To His Bad Debt

Due to X's terrible financial performance, Elon Musk now has the upper hand in negotiating with the banks.

Because of the shocking deterioration in X's finances since Musk took over in October 2022, the lenders haven't been able to sell the debt to investors as planned.

However, Fortune has learned that three of the seven lenders who funded Musk's deal to buy Twitter have formed a group designed to protect themselves from any fire sale, according to a source familiar with the deal. Shawn Tully reported for Fortune.

Because of the shocking deterioration in X's finances since Musk took over in October 2022, the lenders haven't been able to sell the debt to investors as planned.

They are now stuck holding all of it on their balance sheets, as explained by this person. The only way they'll unload the loans is by accepting deep discounts from potential buyers such as hedge funds and other customers for distressed assets.

To fortify their position, Morgan Stanley, Barclays, and Bank of America, lenders that combined provided almost 70% of the financing, have agreed to what's known as a joint "sell-down letter" that expires on January 15, as the source told Fortune.

While all three banks declined to comment, and the exact details of the arrangement aren't known, sell-down letters typically require that if one bank receives an offer for its loans, it can't accept it without giving the other members the right to the same deal on a pro-rata basis.

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