Morgan Stanley Reportedly Widens Search For xAI Debt Buyers After Musk-Trump Rift
Synopsis
Bloomberg reported that the bank is now reaching out to smaller lenders who were not given access last week when the debt offering was launched.
Morgan Stanley is reportedly reaching out to a larger pool of investors to strengthen demand for a $5 billion debt sale for Elon Musk’s artificial intelligence startup, xAI Corp.
Bloomberg reported, citing people familiar with the matter, that the bank is now reaching out to smaller lenders who were not given access last week when the debt offering was launched.
The debt deal offers a window into what investors think about Musk's public dispute with U.S. President Donald Trump, which shocked aides and allies of two of the most powerful men in conservative politics.
As per the report, when Morgan Stanley launched the offering early last week, it already had more than $3.5 billion in orders, which boosted hopes that it would be oversubscribed. However, by Monday, demand reached about $5 billion.
Banks typically prefer the demand to be significantly higher than the size of the offering, as this grants them greater flexibility regarding prices and other terms.
According to the report, Morgan Stanley is still aiming to finalize the investor list by June 17, as initially planned.
The demand for xAI debt was expected to be relatively high, as it offered credit investors an entry into the lucrative artificial intelligence market. Earlier this year, Musk had merged his social networking website X with xAI.
According to a Bloomberg report, xAI reportedly told investors that the company was valued at $94 billion last week.
The debt package includes a floating-rate term loan, a fixed-rate term loan, and senior secured notes, according to sources cited by Bloomberg. The yields for the senior notes were pitched at 12%, but now xAI may need to sweeten the offer to attract investors.
Earlier this year, Morgan Stanley sold about $11 billion worth of X debt without much hassle due to optimism about Musk's companies. Musk was overseeing the ambitious cost-cutting efforts of the Trump administration.
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