SpaceX has been granted investment-grade credit assessments by Moody's, Fitch and S&P, according to people with knowledge of the matter. The ratings are likely to reduce the company’s cost of borrowing as it pursues additional financing around its public offering.
The company is advancing a sizable initial public offering that is expected to raise about $75 billion. The IPO is planned to be priced on Thursday, with shares scheduled to begin trading the following day. In its filing with the Securities and Exchange Commission, SpaceX reported $29.1 billion of long-term debt as of March 31.
Analysts at CreditSights said they anticipate a debt offering soon after the IPO. The bulk of SpaceX’s long-term obligations stems from a $20 billion bridge loan that matures in September 2027. According to the IPO filing, proceeds from certain debt financings and the IPO itself must be used to repay at least a portion of that $20 billion bridge loan within six months of receiving proceeds.
Much of the bridge facility was drawn to refinance high-interest, non-investment-grade debt tied to Elon Musk’s social media and artificial intelligence ventures, the IPO filing says. The company’s registration document also indicates an intention to maintain an investment-grade credit rating, and it suggested that it already views itself as investment grade.
However, the filing leaves open which specific ratings would be treated as investment grade for the company, and it is not yet clear whether that designation would apply across unsecured and secured measures of credit quality.
Market participants and corporate financiers will be watching whether the newly reported ratings translate into lower spreads on SpaceX’s bonds or facilitate the anticipated post-IPO debt issuance. Credit markets will also monitor how quickly the company uses IPO and financing proceeds to address the large bridge loan that currently dominates its reported debt position.
Summary
SpaceX has reportedly received investment-grade ratings from three major rating agencies. The company is proceeding with an IPO expected to raise about $75 billion and carries $29.1 billion in long-term debt, largely driven by a $20 billion bridge loan maturing in September 2027. Filings require repayment of at least part of that bridge loan within six months of receiving proceeds from specified financings and the IPO.
Key points
- SpaceX was assigned investment-grade ratings by Moody's, Fitch and S&P, according to people with knowledge of the situation.
- The firm’s IPO is expected to raise about $75 billion; pricing is slated for Thursday with trading to begin the next day.
- As of March 31, SpaceX reported $29.1 billion in long-term debt, including a $20 billion bridge loan that matures in September 2027.
Risks and uncertainties
- It is unclear which specific credit grades will be considered investment grade for SpaceX, including whether secured ratings are included - this uncertainty affects how the ratings will be interpreted by investors and creditors.
- The company is required to use proceeds from certain debt financings and the IPO to repay at least part of the $20 billion bridge loan within six months of receiving proceeds; execution risk around timing and amounts repaid could affect its credit position.
- Much of the bridge loan was used to refinance high-interest junk debt linked to Musk’s other ventures, which may complicate capital allocation and refinancing decisions for SpaceX and influence perceptions in credit markets.