Elon Musk’s xAI is upping the yield on offer on a $5 billion debt raise being led by Morgan Stanley to attract investors amid modest demand, according to a Reuters report citing a source with knowledge of the matter.
xAI has offered to pay a 12.5% yield on $3 billion in bonds, the source told the publication. The company had reportedly previously offered a 12% yield.
The AI startup is also offering a $1 billion fixed-rate term loan with a 12.5% interest rate and a $1 billion term loan B priced at 725 basis points (7.25%) over the Secured Overnight Financing Rate (SOFR), expected to be sold at a discount of $0.96 on the dollar. Initially, this loan was priced at 700 basis points over SOFR with a smaller discount.
The deadline for investor commitments was extended from Tuesday to Friday, with allocations planned for the day after closing, potentially Monday if the deal closes Friday.
The yield increase suggests that investors were only willing to buy the debt at higher returns, reflecting lukewarm investor interest and limited pricing flexibility for xAI.