Elon Musk’s xAI is paying back $3 billion in bonds early

Elon Musk’s artificial intelligence company xAI is planning to retire $3 billion in high-yield bonds before they come due.

The move is part of a broader push to wipe out the roughly $17.5 billion in combined debt sitting across xAI and Musk’s social media platform X. Morgan Stanley, which handled the debt raises for both companies, has been telling existing lenders that the firms intend to repay everything they owe, according to people who asked not to be named because the discussions are private.

Where the money is coming from remains unclear. The companies have not revealed the source of the capital. What is clear, though, is the timing. SpaceX, which acquired xAI in February in a deal valuing the AI startup at $250 billion, is preparing for what could be one of the biggest initial public offerings in history. Bloomberg reported last week that the Texas-based firm could confidentially file for an IPO as soon as this month, potentially valuing it above $1.75 trillion and keeping it on track for a June listing.

Cleaning up the balance sheet before that listing makes obvious sense.

The $3 billion in high-yield bonds are set to be redeemed at about $1.17 on the dollar, a premium that reflects the unusual decision to pay them off this early. The securities were originally sold in June 2025, structured in a way that signaled they were expected to stay outstanding for at least two years. The bonds carry a 12.5% coupon, were sold at par and have rallied sharply in recent weeks. Pricing data from Trace shows they climbed about three points Monday to nearly 117 cents on the dollar.

When companies repay bonds ahead of schedule, they typically must compensate investors with a penalty plus the interest lenders had expected to earn over the original term. Some of xAI’s debt has been outstanding for years, though portions are less than a year old and still carry penalties, Bloomberg said.

The debt picture at xAI got complicated quickly. xAI acquired X in 2025 and assumed its roughly $12 billion in debt. Then, Morgan Stanley led a $5 billion debt package for xAI last year, consisting of high-yield bonds and loans designed to fuel the company’s aggressive expansion into artificial intelligence. That included the $3 billion bond tranche now being retired, along with two additional $1 billion loans.

In January, xAI raised $20 billion in a Series E funding round, giving it significant capital to work with as it restructures ahead of the SpaceX listing. Bankers are said to be working on a broader financing strategy aimed at reducing heavy interest costs that have accumulated in recent years.

The SpaceX-xAI combination now holds a substantial debt load, and investors have been watching closely to see how Musk untangles it. The early bond repayment at a premium is an expensive but deliberate signal: Musk wants a cleaner story when SpaceX goes public.

xAI and X did not respond to requests for comment. Morgan Stanley declined to comment. Reuters noted it could not independently verify the Bloomberg report.