By Shankar Ramakrishnan and Echo Wang

(Reuters) – Elon Musk's political rise has led some Wall Street banks to hope they can soon offload $13 billion in debt tied to his acquisition of the social media platform X, formerly known as Twitter, according to three banking sources.

Some lenders in the consortium, including Morgan Stanley and Bank of America, believe Musk's close association with Republican President-elect Donald Trump could enhance X's prospects. If true, this might allow the banks to sell the debt without suffering significant losses, the sources noted.

Both Musk, X, Morgan Stanley, and Bank of America didn't respond immediately to requests for comments.

Traditionally, banks sell such loans to investors shortly after closing a deal. However, in X's case, the lenders have been unable to offload $44 billion in debt since Musk's 2022 purchase. Musk's extensive platform changes, including large layoffs of content moderators, and certain posts that deterred advertisers, have lowered revenue and increased default risk, diminishing debt value.

Recently, some banking sources indicated X might be witnessing increased user engagement, especially surrounding significant events like the U.S. elections. Trump, reinstated on the platform after being banned by prior management, has been actively posting.

Sources expressed hopes that the uptick in traffic and a strong U.S. economy might lead to improved revenues for X.

Analysts suggest Musk's close relationship with Trump, who appointed him to head a new efficiency-focused government department, could benefit Musk's various enterprises, including Tesla and SpaceX. Following election results, Tesla's market value surpassed $1 trillion for the first time in two years.

The Trump campaign did not respond to a comment request.

DEBT VALUE

It remains uncertain how Musk's connection with the new administration might affect X's business. One source mentioned this could further polarization among users. Meanwhile, platforms like Bluesky and Meta's Threads have gained users as some abandon X post-election.

On election day, U.S. traffic on X peaked at 42.3 million visits, climbing another 10% the following day, before reverting to typical levels. According to Similarweb, 115,000 U.S. users deactivated their X accounts on Nov. 6, marking the highest daily exit since Musk's takeover.

The social media company is expected to submit its latest financials to the lending consortium soon after the quarter concludes next month. This would guide banks in deciding whether to maintain or seek investors for the debt.

The consortium also includes Barclays, Mitsubishi UFJ, BNP Paribas, Mizuho, and Société Générale. BNP, SocGen, and Barclays declined to comment on these matters, while other banks did not provide immediate responses.

Banks have reportedly adjusted the debt's book value to varying extents, based on their outlook. One lender monitors potential loan losses weekly, having set aside reserves accordingly.

Late 2022 attempts to sell the debt received bids implying a potential 20% loss on its face value, but banks chose not to finalize these losses. According to sources, X has consistently met interest payments on its bonds.