SpaceX offers premium yields in upsized $25bn bond sale

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SpaceX premium bond sale

Highlights

SpaceX upsized its bond sale to $25bn from $20bn as orders reached nearly $90bn, driving yields to tighten from initial guidance.
The bonds offer spreads of 1.1 to 1.75 percentage points over U.S. Treasuries across five-to-30-year maturities, exceeding the 0.93 point index and BB junk bond spreads.
Moody's assigned a Baa1 rating as SpaceX plans to use proceeds to repay a March bridge loan, while investors from China and Hong Kong are excluded.

Bond pricing and investor demand

As first reported by the Financial Times, SpaceX is selling $25bn of bonds to institutional investors on Tuesday after bankers increased the offering from $20bn on strong demand. Orders reach nearly $90bn by around noon, according to a person familiar with the deal, allowing expected yields to tighten from initial discussions.

The bonds are marketed at 1.1 to 1.75 percentage points above U.S. Treasuries across maturities of five to 30 years, according to a term sheet seen by the Financial Times. Even after that tightening, the pricing remains above the 0.93 percentage point spread on an Ice Data Services basket of U.S. corporate bonds with similar ratings, and above levels close to some double-B rated junk borrowers, whose spreads stand at 1.56 percentage points.

Moody's assigned SpaceX a Baa1 investment-grade rating late last week. The company says proceeds from the debt sale are set to repay a bridge loan taken out in March after Musk merged xAI and social media platform X into the rocket company.

Risk profile and market implications

Investors are weighing the debt sale as SpaceX shares swing sharply in the first weeks after listing, reflecting debate over whether the group can lift revenue enough to support its $2tn valuation. The stock is up about 5 per cent on Tuesday after falling 16.4 per cent in the previous session.

The elevated yield on the bonds underscores concerns over a business that is burning through billions of dollars to back AI projects and develop data centres in outer space. In a roadshow presented to prospective investors, the company highlights rocket launches, space missions and the use of Starlink internet service in remote locations, according to people familiar with the matter.

Bret Johnsen, SpaceX chief financial officer, tells investors before the sale that the company is committed to preserving a strong investment-grade rating and keeping debt at no more than three times earnings before interest, taxes, depreciation and amortisation, the people say. Investors from China and Hong Kong are barred from the debt sale, mirroring restrictions in the IPO, while Bank of America, Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley serve as active bookrunners.

In our earlier coverage of SpaceX’s volatile post-IPO trading, we explained that the sharp price swings since the June 12 debut may reflect technical factors rather than a clear shift in fundamentals. We also outlined key near-term catalysts—index inclusions, the end of the IPO quiet period, and phased lockup releases—that could influence demand and add selling pressure in the weeks ahead.

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