Morgan Stanley is promoting a $5 billion package of bonds and loans for Elon Musk’s artificial intelligence company, xAI, amid a public dispute between Musk and U.S. President Joe Biden, according to sources familiar with the matter.
Last week, Morgan Stanley began offering a floating-rate term loan B priced at 97 cents on the dollar. This loan carries a variable interest rate of 700 basis points above the SOFR benchmark rate. A second option includes loans and bonds with a fixed 12% interest rate. These terms are preliminary and will depend on investor demand.
Unlike previous deals, Morgan Stanley is not guaranteeing the full $5 billion issuance nor committing its own capital. Instead, the bank is marketing the debt on a “best efforts” basis, meaning the final size depends on investor interest. This cautious approach reflects the current uncertain economic environment and lessons learned from past experiences.
Morgan Stanley and six other banks previously committed $13 billion in debt to finance Musk’s $44 billion acquisition of Twitter (now called X) in 2022. However, they were unable to sell that debt for over two years due to rising U.S. interest rates and company restructuring. The banks only managed to offload the debt earlier this year after X showed improved operational performance and increased platform traffic around the U.S. presidential elections.
Musk’s visible political ties and involvement in the potential return of former President Donald Trump have also influenced investor interest. Some investors seek exposure to artificial intelligence companies and connections to political power, though recent tensions between Musk and the current administration may add risk to the offering.
In addition to the debt package, xAI is reportedly in discussions to raise about $20 billion in equity funding. Sources say this could value the company between $120 billion and $200 billion. Musk had initially considered merging xAI with the social media platform X, but that plan did not progress.
Morgan Stanley is marketing a $5 billion debt package for Elon Musk’s AI startup xAI, offering both floating-rate and fixed-rate options. The bank is taking a cautious “best efforts” approach without guaranteeing the full amount. This move follows challenges from past debt deals linked to Musk’s ventures and comes amid political tensions that could affect investor appetite. Meanwhile, xAI aims to raise significant equity funding, potentially valuing the company at up to $200 billion.
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