Following the merger of SpaceX and xAI, banking advisors for Tesla Motors CEO Elon Musk are evaluating a potential refinancing plan. The initiative aims to reduce the billionaire's substantial interest expenses accumulated in recent years and prepare for a potential initial public offering later this year. Sources indicate that Musk has amassed close to $18 billion in debt from acquiring social media platform X (formerly Twitter) and developing artificial intelligence firm xAI. Although financing terms have not been finalized, the new arrangement is expected to help lower costly debt obligations ahead of an IPO.

Morgan Stanley is anticipated to lead the financing effort. The bank previously headed Musk's acquisition financing for Twitter in 2022 and managed subsequent debt issuance for xAI. Additionally, Morgan Stanley is one of the designated lead underwriters for SpaceX's planned IPO, with other potential underwriters including Goldman Sachs, Bank of America, and JPMorgan. The banks involved have declined to comment, and IPO details remain subject to change.

Musk's track record in debt markets has been mixed. His acquisition of Twitter relied on a $12.5 billion financing package that continues to burden the company with tens of millions in monthly interest payments. Initially, banks were forced to retain the debt on their books due to investor caution over Musk's content moderation policies and their potential impact on ad revenue. It was not until last April that lenders finally offloaded the remaining acquisition debt, selling the last tranche of approximately $1.23 billion in bonds at a fixed rate of 9.5% and 98 cents on the dollar.

Besides Morgan Stanley, X's creditors include Bank of America, Barclays, Mitsubishi UFJ Financial Group, BNP Paribas, Mizuho Financial Group, and Société Générale. In March of last year, Musk merged the social media platform with xAI, valuing X at $45 billion including debt. The AI startup later added about $5 billion in additional debt. Concerned about insufficient profitability and rapid cash burn, creditors had previously urged xAI to avoid further large-scale borrowing.