A measure of credit risk at Elon Musk’s Space X rose to a record high while its bonds dropped after the rockets-to-AI group’s new plans to raise $40bn in debt to buy Nvidia chips spooked investors.\n\nThe spread on Space X’s five-year credit default swaps rose to 194 basis points on Wednesday after the FT reported on the fundraising plans, meaning it now costs $19,400 annually to protect $1mn of its debt against default. The CDS began trading in June at around 110 basis points. Investors were also selling Space X’s debt, pushing the yield over Treasuries on its 2056 bond up 0.09 percentage points on Wednesday to 2.36 percentage points.\n\nSpace X is seeking to raise $10bn in bank loans and $30bn in investment-grade debt to fund its purchases of the chips.
Private capital firm Apollo was expected to lead the deal, while bond giant Pimco was among lenders in talks to fund it. It comes after the company issued $25bn in investment-grade debt in June just weeks after raising $86bn in its historic initial public offering.\n\nMorgan Stanley analyst Adam Jonas this week said some investors were sceptical that Musk’s company would achieve “success as a major provider of frontier AI models”. The $40bn fundraising effort is the latest in a series of blockbuster debt deals by leading Silicon Valley tech groups to fund AI infrastructure.
Source: Financial Times Companies · Summarized by HeadlinesBriefing