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Business Times
3 hours ago
- Business
- Business Times
Musk's xAI extends deadline and ups yield on bonds following lukewarm demand: source
[NEW YORK] Elon Musk's xAi extended the deadline and increased the yield it is paying on a US$5 billion debt sale following lukewarm reception from investors, a source with direct knowledge of the matter said on Friday (Jun 20). The deadline for investors to commit to buying into the deal, which includes bonds and loans, was extended from Tuesday to Friday, this source said, asking not to be named because the details of the deal were private. xAI also upped the yield on the US$3 billion in bonds and a US$1 billion term loan from 12 per cent to 12.5 per cent yield, they said. xAi sweetened the pot on a second term loan from 700 basis points to 725 basis points over the Secured Overnight Financing Rate, known as SOFR. The term loan B is set to be priced at a discount of 96 US cents on the US dollar, the source said. xAI and Morgan Stanley, which is leading the deal, did not immediately respond to requests for comment. High-yield bonds paid an average yield to maturity of 7.6 per cent as at Thursday, according to ICE BofA High Yield Index. Investors are demanding more for xAI's debt because the company and its bonds are not yet rated, giving investors little visibility into the company's finances and increasing the risk. An increase in the yield offer could mean that investors had probably agreed to buy the debt only for a higher yield. The borrower also has lesser flexibility on pricing when investor demand is modest. If the deal closes on Friday, Morgan Stanley will distribute the securities to investors on Monday, this source said. The xAI offering, which was reported on Jun 2 as Musk and US President Donald Trump traded barbs over social media, did not receive overwhelming interest from high-yield and leveraged loan investors, Reuters reported earlier this week. One portfolio manager, who said he passed on the bonds, said a 'good deal' will typically be oversubscribed by three to four times. xAI would up the yields if it didn't attract enough investors, he added. Unlike Musk's debt deal when he acquired Twitter, Morgan Stanley did not guarantee how much it would sell or commit its own capital to the deal, in what is called a 'best efforts' transaction, according to one source familiar with the terms. xAi did not immediately respond to a request for comment. Morgan Stanley declined to comment. REUTERS
Yahoo
13 hours ago
- Business
- Yahoo
Musk's xAi increases yield offer on $5 billion debt raise, source says
By Tatiana Bautzer NEW YORK (Reuters) -Elon Musk's xAi is increasing the yield it is offering on a $5 billion debt raise led by Morgan Stanley, a source with knowledge of the matter said on Friday. xAi is offering to pay 12.5% yield on $3 billion in bonds, said the source who asked for anonymity to disclose non-public information. Previously, sources told Reuters the company had offered a 12% yield. xAi is also offering 12.5% fixed yield on a $1 billion term loan and set to price a $1 billion term loan B at 725 basis points over the Secured Overnight Financing Rate, known as SOFR. The term loan B is set to be priced at a discount of 96 cents on the dollar, the source said. The initial offering on the securities was 12% on the fixed loan and 700 basis points over the SOFR on the floating rate loan. Junk-rated bonds paid an average yield to maturity of 7.602%, according to ICE BofA High Yield Index. The deadline for investor commitments was extended from Tuesday to Friday and allocations will be done one day after closing, the source said. If the deal closes on Friday, allocations will happen on Monday. An increase in the yield offer could mean that investors had probably agreed to buy the debt only for a higher yield. The borrower also has lesser flexibility on pricing when investor demand is modest. 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, Reuters reported earlier this week. Unlike Musk's debt deal when he acquired Twitter, Morgan Stanley did not guarantee how much it would sell or commit its own capital to the deal, in what is called a "best efforts" transaction, according to one person familiar with the terms. xAi did not immediately respond to a request for comment. Morgan Stanley declined to comment.
The Star
13 hours ago
- Business
- The Star
Musk's xAi increases yield offer on $5 billion debt raise, source says
FILE PHOTO: A 3D-printed miniature model of Elon Musk and the xAI logo are seen in this illustration taken January 23, 2025. REUTERS/Dado Ruvic/Illustration/File Photo NEW YORK (Reuters) -Elon Musk's xAi is increasing the yield it is offering on a $5 billion debt raise led by Morgan Stanley, a source with knowledge of the matter said on Friday. xAi is offering to pay 12.5% yield on $3 billion in bonds, said the source who asked for anonymity to disclose non-public information. Previously, sources told Reuters the company had offered a 12% yield. xAi is also offering 12.5% fixed yield on a $1 billion term loan and set to price a $1 billion term loan B at 725 basis points over the Secured Overnight Financing Rate, known as SOFR. The term loan B is set to be priced at a discount of 96 cents on the dollar, the source said. The initial offering on the securities was 12% on the fixed loan and 700 basis points over the SOFR on the floating rate loan. Junk-rated bonds paid an average yield to maturity of 7.602%, according to ICE BofA High Yield Index. The deadline for investor commitments was extended from Tuesday to Friday and allocations will be done one day after closing, the source said. If the deal closes on Friday, allocations will happen on Monday. An increase in the yield offer could mean that investors had probably agreed to buy the debt only for a higher yield. The borrower also has lesser flexibility on pricing when investor demand is modest. 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, Reuters reported earlier this week. Unlike Musk's debt deal when he acquired Twitter, Morgan Stanley did not guarantee how much it would sell or commit its own capital to the deal, in what is called a "best efforts" transaction, according to one person familiar with the terms. xAi did not immediately respond to a request for comment. Morgan Stanley declined to comment. (Reporting by Tatiana Bautzer; Additional reporting by Matt Tracy; Editing by Mark Porter, Alexandra Hudson)
Time of India
14 hours ago
- Business
- Time of India
xAI increases yield offer on $5 billion debt raise: Source
Elon Musk's xAI is increasing the yield it is offering on a $5 billion debt raise led by Morgan Stanley , a source with knowledge of the matter said on Friday. xAI is offering to pay 12.5% yield on $3 billion in bonds, said the source who asked for anonymity to disclose non-public information. Previously, sources told Reuters the company offered a 12% yield. The AI startup is also offering 12.5% fixed yield on a $1 billion term loan and set to price a $1 billion term loan B at 725 basis points over the Secured Overnight Financing Rate, known as SOFR. The term loan B is set to be priced at a discount of 96 cents on the dollar, the source said. The deadline for investor commitments was extended from Tuesday to Friday and allocations will be done on Monday, the source said. xAI and Morgan Stanley did not immediately comment on the matter. Live Events
The Hindu
3 days ago
- Business
- The Hindu
Musk's xAI on track to raise $5 billion in fresh debt, following modest demand
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 . 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. Three bond investors who were offered the debt told Reuters they declined to invest. One of these investors noted that xAI has not yet turned a profit and the debt is not rated. They were especially reticent given Musk's track record when he financed his $44 billion acquisition of social media giant X, known at the time as Twitter, in 2022. The banks that loaned him $13 billion to close the deal were forced to hold that debt on their balance sheets for two years because they could not offload it. While the debt sold in full and on time, it received modest demand from investors, all five people said. Investors submitted orders for roughly 1.5 times the amount of debt available, according to the first two people briefed on the deal. Most similar junk bond deals have typically attracted orders for 2.5 to 3 times the loans and bonds being offered, the people said. Unlike Musk's debt deal when he acquired Twitter, Morgan Stanley did not guarantee how much it would sell or commit its own capital to the deal, in what is called a "best efforts" transaction, according to one person familiar with the terms. In the Twitter acquisition, the banks ended up making money on the debt, selling it with little-to-no discount months after Trump won the White House and Musk's influence in Washington grew. Apart from selling debt, xAI has also been in talks to raise about $20 billion in equity, valuing the company at more than $120 billion, with some investors placing valuations as high as $200 billion, Reuters reported last week.
