Morgan Stanley is seeking to secure $5 billion in debt financing for Elon Musk’s AI company, xAI. According to sources close to the matter, this financing will consist of a mix of bonds and loans. This move comes amidst escalating public tensions between Musk and US President Joe Biden.
Last week, Morgan Stanley began offering potential investors a variable-rate loan (term loan B) priced at 97 percent. This loan is priced at 700 basis points above SOFR. An alternative financing structure consists of a mix of loans and bonds with a fixed rate of 12 percent.
However, these terms are not yet finalized and may change depending on investor interest. According to sources, the bank presented xAI’s financial data at meetings with investors last week. Compared to Musk’s past projects, Morgan Stanley is reportedly acting more cautiously this time. The bank is not guaranteeing the entire financing and is not risking its own capital. Instead, the final amount of financing will be determined based on investor interest using a “best efforts” model. This cautious strategy reflects the tendency of banks to act more prudently, especially during a period of increased economic uncertainty. Sources requested anonymity due to the confidential nature of the discussions. Neither Morgan Stanley nor xAI commented on the matter.The experience of the Twitter acquisition in 2022 is said to have influenced banks to adopt this approach. At that time, banks led by Morgan Stanley provided $13 billion in debt for Musk to acquire Twitter (now X). However, due to rising interest rates and the company’s restructuring process, this debt remained on the banks’ balance sheets for more than two years.
These debts could only be sold recently, thanks to improved platform performance and increased traffic during the US election process.Musk’s growing political influence and the growing appetite for AI ventures also play a significant role in investors’ interest in xAI.
Musk’s growing political influence and the growing appetite for AI ventures also play a significant role in investors’ interest in xAI.
