Elon Musk’s xAI is set to finalize a $5 billion debt deal led by Morgan Stanley, even as investor demand turns cold, two people familiar with the matter said.

The debt sale, including a floating-rate term loan, fixed-rate loan, and secured bonds, will be allocated to investors on Wednesday next week, the people said, asking not to be mentioned because the deal is private.

The floating-rate loan will be available at an interest rate of 700 basis points over the Secured Overnight Financing Rate, a reference rate used to price bond deals, while the fixed-rate loan and the secured notes will carry a yield of about 12%, the two people said.

The average yield-to-maturity on high-yield bonds ended at 7.6%. Musk’s AI company has to pay quite a bit higher because xAI and its debt are not rated, giving investors little visibility into the company’s finances and higher risk.

In addition, three bond investors who pitched the debt told reporters they declined to invest. They provided a parade of reasons for this decision. One investor noted that xAI has not turned a profit, and the debt is not rated.

They were especially cautious about Musk’s history and how he paid for his $44 billion acquisition of the social media platform X, formerly Twitter, in 2022. The banks, which had lent him $13 billion for that deal, had to keep the debt on their books for two years because they could not sell it.

Unlike Musk’s debt deal during his Twitter acquisition, Morgan Stanley did not promise how much it would sell or commit its own money in the transaction, but instead operated under a form of a “best efforts” agreement, according to a person familiar with the terms.

Besides selling debt, xAI is also discussing plans to raise around $20 billion in equity, which would value the company over $120 billion. According to last week’s reports, some investors estimate valuations as high as $200 billion.