By Tatiana Bautzer
NEW YORK (Reuters) – Elon Musk’s Xai is increasing the yields offered in a $5 billion debt hike led by Morgan Stanley, which he said Friday.
Xai offers to pay a 12.5% yield on $3 billion in bonds, said a source who called for anonymity to disclose private information. Previously, sources told Reuters that the company provided a 12% yield.
Xai also offers a fixed yield of 12.5% on a $1 billion term loan and is setting it up to price a $1 billion term loan B at 725 basis points over the safe overnight funding rate known as SOFR. Term Loan B is priced at a discount of 96 cents in dollars, sources said. The initial offering of the securities was 12% on a fixed loan and 700 basis points over the SOFR of Floating Rate Loan.
According to the Ice Bofa High-Hight Index, the junk rated bond paid an average yield on maturity of 7.602%.
The deadline for investors’ commitments will be extended from Tuesday to Friday, with allocations being made one day after the closure, sources said. If the transaction ends on Friday, the allocation will take place on Monday.
An increase in yield offers could mean that investors have agreed to buy debts only for a higher yield. Borrowers have less flexibility in pricing when investors have low demand.
The Xai offering, reported June 2nd, was not overwhelmingly interested in high-yield and leveraged loan investors earlier this week as Musk and US President Donald Trump exchanged barbs on social media.
Unlike Musk’s debt deal, when he bought Twitter, Morgan Stanley, according to one person familiar with the terms, called the “best effort” deal, which did not guarantee that it would sell or commit its own capital to the deal.
Xai did not respond immediately to requests for comment. Morgan Stanley declined to comment.
(Reporting by Tatiana Bautzer, Additional Report by Matt Tracy, Editing by Alexandra Hudson’s Mark Porter)
