Bond Investors Are Wary of SpaceX's Borrowing Binge to Buy Nvidia Chips
Yahoo Finance ·
Space Exploration Technologies ( SPCX -1.88% ) , better known as SpaceX, is planning to take on another $40 billion in debt, and investors don't like it. At all. Because the price of credit default swaps on SpaceX debt is soaring. Credit default swaps (CDSs) are a type of insurance policy that debt investors can purchase to protect against the risk of default on debt instruments. At the beginning of June, the CDS price to protect $1 million of SpaceX debt against default cost $11,000. That's per year. Today, the same CDS costs $19,400, a 76% increase. That dramatic price increase means CDS providers are demanding much higher premiums to insure SpaceX debt because they see a rising risk of default. SpaceX is seeking to borrow $40 billion -- $30 billion via bond issuance and another $10 billion from banks -- to buy chips from Nvidia ( NVDA -0.61% ) . That new borrowing is on top of the $39.4 billion in debt and finance leases SpaceX had at the end of June. So the new borrowing would essentially double the company's debt.
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