Elon Musk, CEO of SpaceX, speaks at the unveiling of the Manned Dragon V2 Space Taxi in Hawthorne, California, U.S. (Photographer: Patrick T. Fallon/Bloomberg)

Elon Musk's SpaceX Cuts Loan Deal by $500 Million

(Bloomberg) -- SpaceX slashed the size of the leveraged loan it sought by $500 million, according to people with knowledge of the matter, the latest twist in a saga that had already seen Elon Musk’s closest ally on Wall Street balk at the terms of the deal.

Space Exploration Technologies Corp. reduced the loan to $250 million despite having enough investors on board to reach the targeted $750 million, the people said. The seven-year debt priced on Tuesday at 99 cents on the dollar and pays interest at 425 basis points above Libor, within the initial guidance for the bigger loan, the people said.

Investors had negotiated to strengthen loan covenants, especially on the definition of earnings for the cash-burning space exploration company, according to one of the people.

Representatives for SpaceX and Bank of America Corp., which is managing the deal, declined to comment. The people with knowledge of the transaction asked not to be identified because the transaction is private.

Changing Advisers

Goldman Sachs Group Inc. was initially canvassing investors for a $500 million deal for SpaceX. During marketing of the loan, Musk changed advisers and chose Bank of America to officially launch the deal to investors at $750 million.

The switch surprised bankers and investors, as Goldman is widely viewed as the Wall Street firm closest to Musk. It helped take Tesla Inc. public in 2010, led its $1.8 billion bond sale last year and advised Musk on his short-lived attempt to take the electric carmaker private for $420 a share.

Goldman balked when SpaceX, a first-time issuer, wanted wide latitude to raise additional debt in the future, people with knowledge of the matter said earlier this month.

The loan isn’t the only way Musk has been trying to raise cash with SpaceX, which was founded in 2002 and last valued at about $28 billion. He also recently inquired with at least one bank about a personal loan tied to his stake in the rocket company, a person with knowledge of the matter said earlier this month.

Disclosures to potential lenders showed the company had positive earnings before interest, taxes, depreciation and amortization of around $270 million for the twelve months through September, people with knowledge of the matter have said earlier. But that’s because it included amounts that customers had prepaid and because it excluded costs related to non-core research and development. Without those adjustments, earnings for the period were negative, the people said.

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