Episode summary
SpaceX Bankers Kick Off Marketing for Debut High-Grade Bond Sale | Bloomberg Businessweek
Bloomberg Businessweek Daily
· · Hosts: Carol Massar, Tim Stenovec · Guests: Robert Schiffman
Summary
SpaceX is coming to the investment-grade bond market for the first time, and Robert Schiffman argues the company is borrowing now because it needs funding for years of heavy spending. He says SpaceX has about $100 billion of cash, but expects roughly $30 billion to $40 billion of negative free cash flow over the next few years, along with a $20 billion term loan due next September that the bond proceeds should help refinance.
Schiffman says the rating agencies have effectively opened the door by assigning SpaceX BA1, tripleB, and tripleB plus ratings, which he sees as a signal that the market should view the company as investment grade rather than junk. He expects strong demand because investors have already been buying the AI theme in other megacap names, and he thinks SpaceX could price cheaply relative to comparable credits.
He also frames the deal as part of a broader borrowing wave tied to AI infrastructure, saying Alphabet, Amazon, Meta and others have already raised more than $300 billion of debt since November. In his view, the market is still early in monetizing AI, which means more borrowing is likely before cash flow starts to show up around 2028.
Key takeaways
- Robert Schiffman says SpaceX needs the bond sale to fund expected $30 billion to $40 billion of negative free cash flow and refinance a $20 billion term loan due next September.
- Schiffman argues the rating agencies' BA1, tripleB, and tripleB plus marks signal that SpaceX should be treated as investment grade, not junk.
- He expects the first SpaceX bond sale to attract heavy demand because investors want exposure to AI-linked credits and “nobody owns this name.”
- Schiffman says the broader AI borrowing boom has already seen Alphabet, Amazon, Meta and others raise more than $300 billion of debt since November.
- He thinks the market is still early in AI monetization and that stronger cash flows may not arrive until 2028.
Notable quotes
“They said this morning that they had hundred billion of cash. They're going to be spending a lot more over the next few years than they make”
“the rating agencies have just teed them up for an enormous inaugural launch”
“you don't have to worry about junk ratings. You don't have to worry about liquidity”
“I actually don't think you should worry either. I think they have a key man that makes a big difference”
“we're we're not quite sure where it all goes”
How the episode opens
Bloomberg Audio Studios podcasts, radio, news. — You're listening to Bloomberg Business Week with Carol Masser and Tim Stenc on Bloomberg Radio. — We got Robert Shipman with us. Bloomberg Intelligence senior technology credit analyst. He joins us here in the Bloomberg Interactive Brokers studio. Okay, I'm going to ask the simple question here, which is SpaceX just raised roughly $86 billion in this IPO. Why are they selling billions of dollars of bonds right now?
Well, they need money though. They said this morning that they had hundred billion of cash. They're going to be spending a lot more over the next few years than they make.
Probably in the neighborhood of 30 to40 billion of negative free cash flow for the next few years. On top of that, they have a $20 billion term loan due next September that they're going to use the proceeds from this bond deal to pay off. So, they're just getting ahead of the curve like everybody else.
Like, why are the Alphabets and Amazons and Metas raising so much? It's because over the next few years they're going to be spending a lot more
And because they can. — And because they can. — I mean, the market's receptive, right? Investors are interested.
Well, not only that, the rating agencies have just teed them up for an enormous inaugural launch. I mean, giving them BA1, tripleB, tripleB plus ratings basically tells the bond market, you don't have to worry about junk ratings. You don't have to worry about liquidity.
Just go run your business over the next 3 or 4 years and you're going to grow into these ratings. If you just looked at this balance sheet, you wouldn't say it looked anything like a solid, stable, investment, great name, but in fact, they told them they are.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- spacex bond sale
- investment-grade debt
- ai ambitions
- ipo borrowing spree
- bank investor calls
Companies and tickers mentioned
- GS
- SpaceX
- Goldman Sachs Group Inc.
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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