SpaceX Is the Next Frontier for Soaring Leveraged Loan Market

(Bloomberg) -- Elon Musk is taking the leveraged loan market to the next frontier.

His rocket company SpaceX is working with Goldman Sachs to raise $500 million of leveraged loans, according to people familiar with the matter who aren’t authorized to speak publicly.

The benefits of this maiden voyage are clear: SpaceX should have ample funding needs for many years to come as it keeps Mars in its sights. Crucially for Musk, loans are more private than most other forms of capital raising -- and very hard to short.

Privately-held SpaceX may well get a friendly reception from leveraged loan investors. They have increasing amounts of cash and fewer options, leaving them happier to fund high-flying, cash-burning companies.

This isn’t a place where no investor has gone before. Ride-hailing firm Uber secured a $1.5 billion loan in March at better terms than initially expected and next generation borrowers like WeWork, Tesla and Netflix have been greeted by debt capital markets this year.

For the $1.3 trillion U.S. leveraged loan market, $500 million isn’t much to swallow. And potential lenders may get the chance to kick the proverbial tires on Musk’s rockets, while also taking a peek at SpaceX’s private financial data.

Like Uber, a lofty enterprise value should work in SpaceX’s favor, as will decent collateralization. With Musk’s other company Tesla flying high on surprisingly good results loan investors may well be ready to go boldly into a SpaceX deal.

©2018 Bloomberg L.P.