Pimco, Apollo Among Funds Looking at Next $3 Billion of X Debt

(Bloomberg) — Pacific Investment Management Co. is among asset managers looking at buying a portion of $3 billion of debt tied to Elon Musk’s buyout of X, according to people with knowledge of the matter.

Apollo Global Management Inc. is also among firms interested in the senior debt, which is being sold by a group of banks led by Morgan Stanley, said the people, who declined to be identified because the information is private. Representatives for Pimco, Apollo and Morgan Stanley declined to comment.

The offering follows the sale of a $1 billion chunk of debt tied to Musk’s purchase of the social-media platform. Diameter Capital Partners and Darsana Capital Partners were among firms that snapped up a major part of that sale, according to people with knowledge of the matter.

The smaller offering was marketed to a select group of investors and was seen as a proof-of-concept trade that could help underpin demand for the company’s debt before it was shown to a broader group of buyers. Spokespeople for Darsana and Diameter declined to comment.

The efforts are the most significant by banks so far to rid themselves of $13 billion of debt tied to Musk’s purchase of what was then called Twitter Inc. that got stuck on their books in 2022 after the billionaire launched a surprise bid to take the company private. Seven banks including Morgan Stanley, Bank of America Corp., Barclays Plc, and Mitsubishi UFJ Financial Group Inc. agreed to finance that deal.

Potential investors are being told they would have a claim on X’s stake in xAI Corp., Musk’s artificial intelligence venture, Bloomberg reported on Monday. The valuation of X is being boosted by a previously undisclosed stake of about $6 billion in xAI, people with knowledge of the matter have said. The size of the stake is based on the latest fundraising that put a roughly $50 billion valuation on xAI. 

News of the AI-related sweetener came at a bad time for the sector. AI-linked stocks and the technology sector saw steep declines on Monday after the success of a cheaper AI model from Chinese startup DeepSeek, which caused jitters about increasing competition and high valuations.

Still, banks broadened out their effort to sell X’s debt despite the market rout, even as some borrowers stood down from launching debt sales. AI is still seen as among the most promising areas in tech for years to come, while US President Donald Trump last week announced a multibillion-dollar AI infrastructure project. Banks may have an easier pitch on Tuesday, with markets looking calmer and the Nasdaq 100 set to rise.

Bankers have contacted a wide group of investors to assess their interest in buying chunks of the $3 billion debt at a small discount to par. While Pimco and Apollo are reviewing the revamped debt package for X, discussions may not result in any deal, the people added. As major players in the credit market, it is standard for them to be among those getting a look in on the deal, along with a number of other funds.

The pricing — previously reported to be in the range of 90 to 95 cents on the dollar — would mark a big improvement on the valuation of X’s borrowings, which were thought to be near 60 cents on the dollar by some firms in 2022 and would have caused steep losses for the banks.

Pimco and Apollo were among firms that bought heavily discounted debt that was stuck on banks’ balance sheets in 2022 as the Federal Reserve raised interest rates.

Among previous hung debt deals, Pimco bought about €1 billion ($1 billion) of debt backing Apollo’s buyout of Worldline SA’s payment terminals unit at 85 cents on the euro. Apollo, meanwhile, bought some of the debt that backed the buyout of Citrix Systems Inc. at 87 cents on the dollar in 2022.

–With assistance from Paula Seligson.

(Updates with more details on Pimco and Apollo, adds context on xAI.)

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