Last-minute twist in xAI deal brings Barclays, MUFG, and UBS on board

By Carmen Arroyo, Jeannine Amodeo, Davide Scigliuzzo and Gowri Gurumurthy

 

A trio of banks joined Morgan Stanley in a $5 billion debt deal for xAI Corp., after the company requested their participation to maintain relationships that could help with financings down the line, according to people with knowledge of the matter.

 

Barclays Plc, Mitsubishi UFJ Financial Group Inc. and UBS Group AG were added to the recent bond and loan sale for Elon Musk’s artificial intelligence startup, said the people, who asked not to be identified because they’re not authorized to speak publicly.

 

Barclays and MUFG both have previous ties to Musk, having helped with the debt financing for his 2022 purchase of X Holdings Corp. — then known as Twitter Inc. MUFG has also had a partnership with Morgan Stanley for many years that allows the two lenders to get involved with one another’s trading and investment banking business. 

 

Representatives for the four banks declined to comment. A representative for xAI didn’t respond to requests seeking comment.

 

The three additional banks were not mentioned throughout much of the sale process led by Morgan Stanley, but eventually received credit in deal documents after stepping in, some of the people said. Morgan Stanley still got the bulk of the fees as lead arranger, the people added.

 

There were multiple other banks that initially wanted to be part of the xAI debt sale, some of the people said. The deal was pre-marketed and launched while Musk was still in the good graces of US President Donald Trump, but their public falling out quickly became a key concern among investors. So too did questions about the startup’s financial wherewithal, including the disclosure that xAI burns through $1 billion a month. 

 

Sometime in the middle of the sale process Morgan Stanley, which has served as Musk’s primary bank for many years, agreed to let Barclays, MUFG and UBS join at the behest of xAI, some of the people said. Their involvement and the associated fees those banks get may help xAI as it pursues additional funding later on, they added, potentially including a revolving loan to help with day-to-day expenses.

 

The company intends to raise another $6.4 billion of capital next year on top of its current plans for an equity raise and the $5 billion of debt it recently finalized, Bloomberg reported. The recent debt deal sets a ceiling on the amount of additional secured financing the company can raise. 

 

It’s not unusual for banks to be added in the middle of a debt sale process, or for the structure to change as underwriters figure out how best to get the deal done.