Elon Musk’s Twitter/X to retire final chunk of buyout debt held by Wall Street

Elon Musk’s social media platform X (formerly Twitter) is planning to repurchase the final $1.2 billion chunk of high-risk debt left over from the $44 billion Twitter buyout in 2022.

This piece is known as second-lien debt, and it’s been sitting like dead weight on the books of seven major banks, led by Morgan Stanley, for almost three years. This last batch is the riskiest of the lot and has been the hardest to get rid of.

The buyback might be funded using proceeds from a recent equity raise, according to a report from Bloomberg. They also said nothing’s locked in yet.

The move, if finalized, would let banks finally dump the worst part of the $13 billion loan package that backed Elon’s takeover. Most of the other debt tied to the deal was already sold off earlier this year. The second-lien piece was the one nobody wanted.

Banks unload risky leftovers as X pushes ahead

Back when the buyout happened, banks expected to flip the loans quickly. Instead, they hit a wall. The value of X sank fast, and there were no buyers. The banks got stuck holding paper that nobody wanted and had to cut valuations by nearly half. But now the mood has shifted.

One reason: Elon’s tight connection with President Donald Trump. That new proximity to the White House is changing how investors look at X’s debt. As one source put it, “It took one election and a billionaire bromance to flip the script.”

Morgan Stanley is now leading the charge to pitch a new $3 billion offering of X debt. They’re telling investors that X is stabilizing. Buyers who’ve seen X’s financials say the numbers look better. X posted $400 million in Ebitda on $710 million revenue in Q4 2024. That’s higher than the two previous quarters. Morgan Stanley says X is on track for about $1.2 billion in adjusted Ebitda this year.

Those improvements are making it easier for banks to sell what’s left. Loans that were once worth 60 cents on the dollar are now being offered at 95 cents or more, according to Bloomberg.

Still, not everything looks pretty. X’s revenue is down nearly 50% since the original buyout. But major cost cuts by Elon have kept the business running. X’s earnings are flat compared to 2022, but those numbers are padded with a bunch of adjustments to make things look better. One investor said, “If they thought they had lost 40% of their principal and now get out at something close to break even, that’s a nice turnaround.”

Investors dig into X’s shady financials

Some investors are raising red flags about how X reports money coming in from “related parties” that aren’t part of the main platform. Restructuring costs are also being removed from the numbers. That includes layoffs — a huge chunk of the workforce got axed after Elon took over. The company now has just $400 million in cash. That’s a steep drop from the $1.4 billion it had in 2022.

Even with all that, the interest in X debt keeps growing. The recent $1 billion sale that closed at 90–95 cents per dollar sparked a flood of inquiries. It’s not just the business. It’s the Musk factor. One source said, “There seems to be no shortage of investors wanting a chance to own a piece of X, and therefore the Musk empire.”

The banks that backed the deal, despite the headaches, have made real money. Bloomberg says they earned about $3 billion in interest since 2022. That’s more than enough to wipe out any paper losses. Still, the longer they hold the debt, the more it gums up their balance sheets. That’s why they want out now, while the market is hot.

Elon’s AI play sweetens the deal for buyers

A big reason for renewed interest is X’s $6 billion stake in xAI, Elon’s artificial intelligence venture. Morgan Stanley is using that as a carrot in its sales pitch. If X goes south, buyers might have a claim on xAI. Investors like the optional upside.

The current $3 billion offering matures in 2029 and pays 6.5% above the Secured Overnight Financing Rate (SOFR). That adds up to a fat 12% yield. High return, high risk. X still doesn’t have a credit rating. Its leverage ratio is around 10 times earnings. That scares off some buyers, but the yield is pulling others in.

Banks know this round won’t be the end. They’ve still got other unsecured chunks on their books. Those are way riskier and could be nearly impossible to sell close to face value. But this round — the one backed by xAI and improved numbers — is the safest part left.

This whole Twitter-turned-X saga is unlike anything Wall Street normally deals with. The fact that it might end with profits for the banks is wild. Robert Willens, a tax expert, said, “They have certainly recovered more than 100 cents on the dollar.”

Still, a lot of this is based on hype. Nobody knows how stable X really is. The platform’s revenue is still way down. Layoffs gutted the team. The cash pile is shrinking. But as long as the numbers can be adjusted just right, and as long as Elon keeps that White House connection, there’s a crowd ready to take the risk.

And Wall Street? They’re finally seeing a way out of the mess.

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