Elon Musk’s xAI is on track to close on a $5 billion debt raise led by Morgan Stanley, despite tepid investor demand, according to two people familiar with the matter.
The $5 billion debt sale, which includes a floating-rate term loan, a fixed-rate loan and secured bonds, will be allocated to investors on Wednesday, the two people said, asking not to be identified because the deal is private. xAI did not immediately respond to a request for comment while Morgan Stanley declined.
The xAI offering, which was reported on June 2 as Musk and U.S. President Donald Trump traded barbs over social media, did not receive overwhelming interest from high-yield and leveraged loan investors, said five people briefed on the deal.
The floating-rate loan will be offered with an interest rate of 700 basis points over the Secured Overnight Financing Rate, a benchmark rate used to price bond deals, while the fixed-rate loan and secured notes will pay a yield of roughly 12%, the two people said.
The average yield-to-maturity on high-yield bonds closed Monday at 7.6%, according to the ICE BofA High Yield Index .MERH0A0. Musk’s AI company has to pay significantly more since xAI and its debt are not yet rated, giving investors little visibility into the company’s finances and higher risk.
