Pacific Investment Management Co. is among the asset managers considering the acquisition of a portion of $3 billion in debt associated with Elon Musk’s buyout of X, according to sources familiar with the situation. Apollo Global Management Inc. is also interested in the senior debt, which is being offered by a consortium of banks led by Morgan Stanley. The sources, who wished to remain anonymous due to the confidential nature of the information, noted that representatives from Pimco, Apollo, and Morgan Stanley declined to comment.
This offering follows a previous sale of $1 billion in debt related to Musk’s acquisition of the social media platform. Diameter Capital Partners and Darsana Capital Partners were reported to have purchased a significant portion of that earlier sale. The smaller offering was targeted at a select group of investors and was viewed as a proof-of-concept trade intended to gauge demand for the company’s debt before presenting it to a wider audience. Spokespeople for Darsana and Diameter also declined to comment.
These efforts represent the most substantial initiative by banks to offload $13 billion in debt linked to Musk’s acquisition of Twitter Inc., which became stranded on their balance sheets in 2022 following Musk’s unexpected bid to take the company private. Seven banks, including Morgan Stanley, Bank of America Corp., Barclays Plc, and Mitsubishi UFJ Financial Group Inc., had agreed to finance that transaction.
Potential investors are reportedly being informed that they would have a claim on X’s stake in xAI Corp., Musk’s artificial intelligence venture. The valuation of X is reportedly enhanced by a previously undisclosed stake of approximately $6 billion in xAI, based on recent fundraising that valued xAI at around $50 billion. However, the timing of this AI-related incentive coincided with a downturn in the sector, as AI-linked stocks and the technology market experienced significant declines following the introduction of a more affordable AI model by Chinese startup DeepSeek, raising concerns about increased competition and inflated valuations.
Despite the market downturn, banks have expanded their efforts to sell X’s debt, even as some borrowers have paused their debt sales. AI continues to be regarded as one of the most promising sectors in technology for the foreseeable future, especially following a recent announcement by former President Donald Trump regarding a multibillion-dollar AI infrastructure project.
On Tuesday, banks may find it easier to pitch the debt, as market conditions appear to be stabilizing, with the Nasdaq 100 expected to rise. Bankers have reached out to a broad range of investors to gauge their interest in purchasing portions of the $3 billion debt at a slight discount to par. While Pimco and Apollo are evaluating the revised debt package for X, it remains uncertain whether these discussions will lead to a finalized deal. As significant players in the credit market, it is typical for them to be among the first to review such opportunities.
