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.
(Reporting by Tatiana Bautzer; Additional reporting by Matt Tracy; Editing by Mark Porter, Alexandra Hudson)
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