Musk’s xAI to buy back $3 billion of debt early in run-up to IPO

Elon Musk’s artificial intelligence startup xAI is planning to pay back $3 billion of junk bonds early, according to people with knowledge of the matter and data compiled by Bloomberg.

The company, which Musk recently combined with his rocket business SpaceX, is set to redeem its $3 billion of high-yield bonds at about 117 cents on the dollar, the people said, a significant premium that reflects the unusual move to pay down the obligation so early. The securities were sold in June, with a structure that indicated the debt was expected to remain outstanding for at least two years.

The notes have traded up in recent weeks and jumped about 3 points on Monday to almost 117 cents on the dollar, according to Trace pricing data. When companies repay bonds so early, they often have to pay a penalty to investors and also the interest the debt would have incurred over a pre-determined time period.


Representatives for xAI and Morgan Stanley, which had led the bond deal, didn’t immediately respond to requests for comment.

Musk, the world’s richest person with a $666 billion fortune, is looking to take SpaceX public in the coming months. The Starbase, Texas-based firm is targeting filing confidentially for an initial public offering as soon as this month, Bloomberg reported last week, which would keep it on track for a June listing.

The combined business has about $18 billion of debt from xAI and also Musk’s buyout of Twitter, which later became X and was folded into xAI. Bankers have been working on a potential financing plan that could trim some of the heavy interest costs that the companies racked up in recent years.

In June, xAI sweetened pricing to entice investors to buy its $5 billion of debt. The deal included three tranches: the $3 billion of bonds being paid back early, and also two loans of $1 billion each.

The bonds sold at a 12.5% coupon and at par, as did one of the loans. The other loan came at 7.25 percentage points over the benchmark and a discounted price of 96 cents on the dollar.

The company also changed its debt documents last year, with provisions that make it more difficult for xAI to shift assets, which protects lenders’ collateral. It also set a ceiling on the amount of secured debt it can raise.