{"id":30283,"date":"2025-06-06T22:18:05","date_gmt":"2025-06-06T22:18:05","guid":{"rendered":"https:\/\/financialrush.com\/?p=30283"},"modified":"2025-06-06T22:18:05","modified_gmt":"2025-06-06T22:18:05","slug":"elon-musks-feud-with-donald-trump-muddies-xai-debt-raising-for-morgan-stanley","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=30283","title":{"rendered":"Elon Musk\u2019s feud with Donald Trump muddies xAI debt raising for Morgan Stanley"},"content":{"rendered":"<p> \n<\/p>\n<div>\n<p>Unlock the Editor\u2019s Digest for free<\/p>\n<p class=\"article__content-sign-up-topic-description o3-type-body-base\"><span>Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=57d5b733-9060-44fe-94c3-41a600ebb079\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>Elon Musk\u2019s artificial intelligence company xAI was closing in on a $5bn debt financing package to fund new data centres and chips to power its business. Then on Thursday the world\u2019s wealthiest man torpedoed his relationship with US President Donald Trump.<\/p>\n<p>Musk\u2019s bankers at Morgan Stanley must now contend with this new complication as would-be investors try to assess the fallout from the <a href=\"https:\/\/www.ft.com\/content\/3e5b75b4-7259-413a-9483-5c5613423ad7\" data-trackable=\"link\">dramatic unravelling<\/a> of Musk\u2019s ties to the president, according to people briefed on the matter. The debt could be more expensive too, they added. <\/p>\n<p>Before the two men launched into a war of words \u2014 which included Trump\u2019s threat to rip up Musk\u2019s government contracts \u2014 investors had placed more than $4bn of orders for the deal. <\/p>\n<p>Lending money to an AI venture belonging to the president\u2019s \u201cfirst buddy\u201d, as <a href=\"https:\/\/www.ft.com\/stream\/fdf71598-69ee-4801-a704-df53f01ef286\" data-trackable=\"link\">Musk<\/a> referred to himself, also looked like a solid bet. <\/p>\n<p>The enthusiasm was drawing <a href=\"https:\/\/www.ft.com\/stream\/4169dc7c-0429-4bb6-855f-9cfb4353606b\" data-trackable=\"link\">Morgan Stanley<\/a> close to the finish line on the debt raising, with big name investors such as TPG in tow.<\/p>\n<p>The interest was so high that Morgan Stanley had floated the prospect that <a href=\"https:\/\/www.ft.com\/stream\/7ca0392b-5e25-4e22-a988-f2a10967784b\" data-trackable=\"link\">xAI<\/a> might lock in cheaper financing than they had initially pitched.<\/p>\n<p>But that pricing is now up in the air, with some investors wagering xAI may have to pay up to lock in the financing.<\/p>\n<p>The multibillion-dollar borrowing package is still expected to be split between fixed- and floating-interest rate loans as well as a corporate bond, and a person briefed on the matter said the $5bn capital raising was still on track. <\/p>\n<p>Bankers had earlier in the week debated reducing the coupon on the bonds and fixed-rate loans from 12 per cent to 11.5 per cent, while the floating-rate loan was expected to price with an interest rate 7 percentage points above the benchmark floating interest rate.<\/p>\n<p>\u201cThis makes it even harder,\u201d one person conducting due diligence on the deal said of Musk\u2019s fallout with Trump. \u201cYou need government support for that whole ecosystem, not just\u00a0for this. It has to have some impact on\u2009.\u2009.\u2009.\u2009people\u2019s comfort\u00a0level with supporting it.\u201d<\/p>\n<p>xAI management met investors on Thursday as the two men locked heads on social media, sharing projections for the company\u2019s business and its growth prospects.<\/p>\n<p>Morgan Stanley had pitched the debt to large credit shops who could place orders of at least $100mn and had targeted many of the same investors who had agreed to buy loans from xAI\u2019s sister company, social media site X, earlier this year, several people said.<\/p>\n<p>In a sign of the effect the kerfuffle was having on Musk\u2019s businesses, prices on X\u2019s debt slid to about 96 cents on the dollar from more than 99 cents a day earlier.<\/p>\n<p>Even before the spat, Morgan Stanley had faced some investor pushback. Lenders had raised concerns with the documents that underpin the deal, requesting that xAI buttress a number of traditional safeguards that are offered to investors. Those include the amount of incremental debt xAI can take on as well how much cash it can pay out to its investors.<\/p>\n<p>Others had raised questions about the intellectual property that secures the loan package and the value of the collateral. The debt is also secured by data centres xAI is building.<\/p>\n<p>Some investors had signalled they would walk away from the deal if their concerns were not met, which could diminish how much money xAI is able to raise or increase its interest burden. Morgan Stanley is working towards a deadline of June 17 to hammer out these terms.<\/p>\n<p>xAI did not immediately respond to a request for comment. Morgan Stanley and TPG declined to comment.<\/p>\n<p>Investors who have been conducting due diligence on the debt said xAI was lossmaking and revenues were small. But their investment thesis is in part underpinned by the company\u2019s equity valuation and their belief xAI will begin to sell lucrative corporate contracts to use its technology. <\/p>\n<p>\u201cIt\u2019s a product that will probably be one of the winners of commercial\u00a0AI,\u201d one lender said. \u201cOn the consumer side OpenAI has a big lead but on the commercial side they can be a material player and that will be worth a lot more than $15bn to $20bn.\u201d<\/p>\n<p>The Financial Times <a href=\"https:\/\/www.ft.com\/content\/703e93f1-28bf-4890-8c9c-141bf81dd206\" data-trackable=\"link\">reported on Monday<\/a> that xAI was launching a $300mn share sale that would value the group at $113bn.<\/p>\n<p>Nonetheless, some creditors have complained about the limited data that has been shared so far.<\/p>\n<aside aria-labelledby=\"aside-label\" class=\"n-content-recommended--single-story n-content-recommended--inset\" data-component=\"recommended\">\n<p class=\"n-content-recommended__title o3-type-body-highlight\">Recommended<\/p>\n<div class=\"o-teaser o-teaser--article o-teaser--small o-teaser--stacked o-teaser--has-image js-teaser\" data-id=\"368586a4-80e6-4715-b56e-dd63f8c7df59\">\n<div class=\"o-teaser__image-container js-teaser-image-container\"><a href=\"https:\/\/www.ft.com\/content\/368586a4-80e6-4715-b56e-dd63f8c7df59\" data-trackable=\"image-link\" data-trackable-context-story-link=\"image-link\" tabindex=\"-1\" aria-hidden=\"true\"><\/p>\n<div class=\"o-teaser__image-placeholder\" style=\"aspect-ratio:2048\/1152\"><\/div>\n<p><\/a><\/div>\n<\/div>\n<\/aside>\n<p>People familiar with the deal said that Morgan Stanley was keeping a tight yoke on access to the data room and on calls with management. One person added that a slide deck xAI provided ahead of a management presentation to investors on Thursday had roughly 10 or fewer slides.<\/p>\n<p>\u201cIt was really pretty fugazi and I say that as a lover of the xAI data room,\u201d the person said, using a slang term for phoney.<\/p>\n<p>\u201cIt\u2019s all fantasy, it\u2019s an idea,\u201d a second person said of the presentation. \u201cThey are spending money, not making money yet.\u201d<\/p>\n<p><em>Additional reporting by Robert Smith in London<\/em><\/p>\n<\/div>\n\n<br \/><a href=\"https:\/\/www.ft.com\/content\/57d5b733-9060-44fe-94c3-41a600ebb079\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this&hellip;\n","protected":false},"author":5,"featured_media":30284,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[],"class_list":["post-30283","post","type-post","status-publish","format-standard","has-post-thumbnail","category-us","cs-entry","cs-video-wrap"],"_links":{"self":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts\/30283","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=30283"}],"version-history":[{"count":0,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts\/30283\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/media\/30284"}],"wp:attachment":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=30283"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=30283"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=30283"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}