SpaceX bankers prepare for bond sale of at least US$20 billion

[NEW YORK] Bankers for Elon Musk’s SpaceX are preparing to hold calls with investors as soon as next week to discuss a potential bond offering on the heels of the company’s record IPO, according to people with knowledge of the matter.

The bond is expected to be at least US$20 billion, and the calls may kick off on Monday (Jun 22), said the people, who asked not to be identified because they’re not authorised to speak publicly. Plans and timing may change, they said.

Musk’s rocket, satellite and AI conglomerate is planning to issue high-grade US dollar bonds for the first time. The company received ratings in the BBB tier from all three major bond graders on Thursday, paving the way for cheaper borrowing as it seeks financing after its IPO.

Proceeds from the debt sale would refinance a temporary US$20 billion bridge loan that matures in September 2027. That loan makes up the bulk of SpaceX’s US$29.1 billion of long-term debt as of Mar 31, the company said in its IPO filing with the Securities and Exchange Commission.

Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs Group and Morgan Stanley provided the bridge financing and are expected to run the deal, the people said.

SpaceX and Bank of America did not respond to requests for comment. Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley declined to comment.

SpaceX’s historic initial public offering turned the start-up into one of the world’s most valuable public companies and turned its founder into the world’s first trillionaire. The company’s embrace of AI with the acquisition of Musk’s xAI in February made the listing somewhat of a referendum on the IPO prospects of competitors Anthropic and OpenAI, both of which plan to go public as soon as this year.

Moody’s Ratings and Fitch Ratings graded SpaceX’s debt at Baa1 and BBB+ respectively, or three steps above junk. S&P Global Ratings assigned a BBB rating, one notch lower.

Musk has utilised debt markets extensively to buy or grow his businesses, securing billions in bank commitments and structuring complex financings. But it has not all been smooth sailing. His 2022 buyout of Twitter loaded the company with roughly US$12.5 billion of borrowings, creating a notorious hung debt quagmire for Wall Street banks who were initially unable to sell it to investors. They ultimately succeeded in doing so last year.

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“The company will likely want to establish a track record in debt markets soon,” said CreditSight’s analyst Matt Woodruff ahead of the potential bond sale. “They will need money down the road for capital expenditure so from that perspective, the sooner the better,” he said.

In its filing, SpaceX said capex will increase “substantially” in the future and that it planned to use “a range of debt and equity financing solutions” to fund future investments.

SpaceX had a net loss of US$4.28 billion on revenue of US$4.69 billion for the first quarter, compared with a net loss of US$528 million on revenue of about US$4 billion a year earlier.

But it has some key contracts that will generate future revenue, including a deal with Alphabet’s Google, which has agreed to pay SpaceX US$30 billion for computing power under a cloud services deal that runs through mid-2029. It also has a roughly US$45 billion deal with Anthropic PBC over about the next three years. BLOOMBERG