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Morgan Stanley Markets $5 Billion Debt Package for Elon Musk’s xAI Amid Political Tensions

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Morgan Stanley is marketing a $5 billion debt package, including bonds and two loans, for Elon Musk’s artificial intelligence company xAI, according to sources familiar with the matter. The move comes during escalating tensions between Musk and U.S. President Joe Biden, adding complexity to the fundraising efforts.

Last week, Morgan Stanley began discussing a floating-rate term loan B, priced at 97 cents on the dollar, with an interest rate set at 700 basis points above the SOFR benchmark. A second financing option offers a fixed rate of 12%, though both structures are subject to investor demand and may change as discussions progress. Preliminary financial details were shared with investors during a recent meeting.

Unlike prior Musk-related transactions, Morgan Stanley is approaching this deal on a “best efforts” basis, meaning it will not guarantee the full issue volume or commit its own capital. This cautious stance reflects a more conservative lending approach amid uncertain macroeconomic conditions. The bank’s restraint follows its experience with Musk’s $44 billion acquisition of Twitter (now X) in 2022, when seven banks led by Morgan Stanley were left holding $13 billion in debt for over two years after the Federal Reserve raised interest rates.

Banks typically offload such loans to investors soon after deals close, but the X debt remained on their books until early 2024. Improved financial performance at X, bolstered by increased platform traffic and Musk’s proximity to former U.S. President Donald Trump, finally allowed banks to sell the debt. Investor interest was also fueled by growing enthusiasm for artificial intelligence investments and the potential political influence tied to Musk’s ventures.

In parallel with the debt sale, xAI has been in discussions to raise around $20 billion in equity funding. Depending on negotiations, the company’s valuation could range from over $120 billion to as much as $200 billion, according to various sources. An earlier plan to merge xAI with social media platform X was ultimately abandoned.

However, recent political developments have complicated Musk’s fundraising prospects. A public rift between Musk and Trump has emerged, potentially jeopardizing federal contracts or grants to Musk’s private companies. This political uncertainty could dampen investor appetite for xAI’s debt or lead to demands for higher risk premiums.

Morgan Stanley and xAI declined to comment on the ongoing negotiations.

Digital Edge Raises Over $1.6 Billion to Fuel Expansion Across Asia

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Singapore-based data centre company Digital Edge announced on Monday that it had successfully raised over $1.6 billion in new capital through a mix of equity and debt financing. This funding is intended to drive the company’s growth as it expands to meet the surging demand for cloud and artificial intelligence services across Asia.

The capital raised includes approximately $640 million in equity investment from both existing and new investors, as well as $1 billion in debt financing. Digital Edge is a portfolio company of Stonepeak, a New York-based investment firm with a focus on infrastructure and real assets.

Since its establishment in 2020, Digital Edge has rapidly expanded its footprint, currently operating 21 data centres with more than 500 megawatts of capacity in service or under construction. The company is also developing an additional 300 megawatts of capacity for future use across multiple Asian countries, including Japan, Korea, India, Malaysia, Indonesia, and the Philippines.

 

Frank McCourt’s Project Liberty Proposes Bid for TikTok’s U.S. Assets

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Frank McCourt, the billionaire entrepreneur and former owner of the Los Angeles Dodgers, has announced that his venture, Project Liberty, along with its consortium partners known as The People’s Bid, is making a formal proposal to acquire TikTok’s U.S. assets from ByteDance. This move comes ahead of the January 19 deadline set by a law signed by President Joe Biden, which mandates ByteDance to sell TikTok or face a potential ban in the U.S.

The consortium has not disclosed the exact value of the offer but assured that it has the financial backing to complete the deal. The group highlighted interest from private equity funds, family offices, and high-net-worth individuals, alongside debt financing from one of the U.S.’s largest banks, which will provide the necessary capital to execute the acquisition.

McCourt, who launched Project Liberty last year with the aim of acquiring TikTok’s U.S. operations, emphasized that the acquisition would ensure the platform’s continuity without reliance on the current TikTok algorithm, thereby avoiding a potential ban. He expressed optimism about working with ByteDance, President-elect Donald Trump, and the incoming administration to finalize the deal, ensuring that millions of Americans can continue to use the platform.