Morgan Stanley is raising over $5 billion debt for Elon Musk’s xAI – report

Morgan Stanley (NYSE:MS) is reaching out to investors for a $5 billion debt sale for xAI, the artificial intelligence company owned by Elon Musk, coming right after the fallout between Musk and U.S. President Donald Trump.

The debt offering was launched last week and comprises a floating-rate term loan, a fixed-rate term loan, and senior secured notes, according to a Bloomberg report that cites people familiar with the deal.

Morgan Stanley’s approach seems different this time, as the bank is not guaranteeing the issue nor committing its own capital, instead using a “best efforts” strategy where the deal depends on investor interest.

As of early last week, the debt offering had already exceeded $3.5 billion in orders, and by Monday, June 9, the demand reached around $5 billion. The bank began reaching out to smaller lenders who had not been given access last week, the report said. The bank aims to finalize its investor list by June 17.

The bank is discussing a floating-rate term loan B at 97 cents on the dollar with a variable interest rate of 700 basis points over the SOFR benchmark rate, according to another report. The bank has flexibility on pricing and terms.

The proceeds are intended for general corporate purposes, and the debt is reportedly tied to xAI, which encompasses both—the AI startup and social media platform X, formerly Twitter.

The offering comes amid heightened scrutiny of Musk’s ventures following the public feud with Trump, that cut the market value of Musk’s Tesla (NASDAQ:TSLA) by around $75 billion. This could potentially impact investor appetite for Musk-related debt. Still, the deal offers credit investors rare exposure to the fast-growing AI sector.

Besides the debt sale, xAI is reportedly in discussions to raise up to $20 billion in equity funding, with some sources suggesting a potential company valuation exceeding $120 billion.

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