Catenaa, Thursday, June 19, 2025- Elon Musk’s artificial intelligence startup xAI is set to raise $5 billion through a complex debt offering led by Morgan Stanley, despite lukewarm interest from major investors and heightened risk premiums, according to sources familiar with the transaction.
The debt package includes a floating-rate term loan, a fixed-rate loan, and secured bonds. It is scheduled to be allocated Wednesday, with the floating-rate loan priced at 700 basis points above the Secured Overnight Financing Rate and fixed instruments yielding around 12%.
That is significantly above the 7.6% average yield for US junk bonds, reflecting the market’s cautious view of xAI’s financials and the absence of a formal credit rating.
Investor response was measured, with the offering reportedly oversubscribed by only 1.5 times — below the typical 2.5 to 3 times seen in comparable high-yield sales.
Three prospective investors told Reuters they declined to participate, citing xAI’s lack of profitability, high risk, and Musk’s previous debt-heavy acquisition of Twitter, now rebranded as X.
Unlike Musk’s 2022 Twitter deal, where banks held on to $13 billion in unsold debt for years, Morgan Stanley has structured the xAI deal on a “best efforts” basis, offering no guarantees and committing no capital.
The fundraising comes as xAI pursues a parallel equity raise of up to $20 billion, potentially valuing the firm between $120 billion and $200 billion. Musk’s growing influence in Washington following Trump’s return to the White House is seen as a key factor in investor calculus, analysts say.
