Elon Musk's xAI company set to raise $5 billion in new debt despite limited demand

From Yahoo Finance: 2025-06-17 15:31:00

Elon Musk’s xAI is set to close a $5 billion debt raise led by Morgan Stanley, despite limited investor interest. The debt sale includes a floating-rate term loan, fixed-rate loan, and secured bonds. The offering did not attract high-yield and leveraged loan investors, with xAI having to pay a high yield due to its unrated status and financial opacity.

The floating-rate loan will have an interest rate of 700 basis points over the Secured Overnight Financing Rate, while the fixed-rate loan and secured notes will yield around 12%. This is significantly higher than the average yield-to-maturity on high-yield bonds, which closed at 7.6%. Musk’s AI company faces challenges due to its lack of a credit rating, leading some investors to be cautious.

Investor demand for xAI’s debt was modest, with orders totaling 1.5 times the available amount. This falls short of typical junk bond deals that attract orders for 2.5 to 3 times the amount being offered. Unlike Musk’s previous debt deal when acquiring Twitter, Morgan Stanley did not guarantee the sale amount or commit its own capital to the xAI transaction.

Apart from the debt raise, xAI is in talks to secure around $20 billion in equity, potentially valuing the company at over $120 billion. Some investors even value the company as high as $200 billion. This move comes as xAI faces challenges with its debt offering and financial transparency.

Read more: Exclusive-Musk’s xAI on track to raise $5 billion in fresh debt, following modest demand