SpaceX bondholders are bolstered by a fat equity cushion, high-grade ratings and a relatively small amount of debt outstanding — but they depend on founder Elon Musk, according to Bloomberg Intelligence. “There’s a huge risk there, and the rating agencies have actually pointed this out in terms of governance,” Robert Schiffman, BI senior technology credit analyst, tells Bloomberg News’ James Crombie in this special episode of the Credit Edge podcast. “You’re absolutely on an Elon Musk trip — his vision and his ability to raise money is a large portion of this company right now,” adds George Ferguson, BI senior equity analyst for aerospace, defense and airlines. The trio also discuss poor secondary performance in SpaceX bonds, relative value compared with the equity, and credit-market risks if AI flops.

SpaceX bondholders are bolstered by a fat equity cushion, high-grade ratings and a relatively small amount of debt outstanding &mdash; but they depend on founder Elon Musk, according to Bloomberg Intelligence. &ldquo;There&rsquo;s a huge risk there, and the rating agencies have actually pointed this out in terms of governance,&rdquo; Robert Schiffman, BI senior technology credit analyst, tells Bloomberg News&rsquo; James Crombie in this special episode of the Credit Edge podcast. &ldquo;You&rsquo;re absolutely on an Elon Musk trip &mdash; his vision and his ability to raise money is a large portion of this company right now,&rdquo; adds George Ferguson, BI senior equity analyst for aerospace, defense and airlines. The trio also discuss poor secondary performance in SpaceX bonds, relative value compared with the equity, and credit-market risks if AI flops.

The Credit Edge reviews the top credit news of the week and looks at the week ahead, with in-depth research of the most important corporate sectors, trends and themes. Analysis of specific corporate bonds and credit default swaps is backed by Bloomberg Intelligence's robust data sets and indexes.

The Credit Edge reviews the top credit news of the week and looks at the week ahead, with in-depth research of the most important corporate sectors, trends and themes. Analysis of specific corporate bonds and credit default swaps is backed by Bloomberg Intelligence's robust data sets and indexes.

The Credit Edge by Bloomberg Intelligence

SpaceX Bondholders Face Huge Key Person Risk on Their Elon Musk Trip

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Companies need to move fast to refinance leveraged-buyout debt coming due over the next few years, according to ICG. “Folks should start getting ahead of it because the traffic jam may be more the issue than anything,” David Saitowitz, the $126 billion global alternative asset manager’s head of US liquid credit, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s Mike Holland in the latest Credit Edge podcast. “That could be the kind of risk event that may push the market wider for a period of time,” he says, referring to credit spreads. They also discuss the AI funding bubble, collateralized loan obligation performance and fallen-angel risk.

Companies need to move fast to refinance leveraged-buyout debt coming due over the next few years, according to ICG. &ldquo;Folks should start getting ahead of it because the traffic jam may be more the issue than anything,&rdquo; David Saitowitz, the $126 billion global alternative asset manager&rsquo;s head of US liquid credit, tells Bloomberg News&rsquo; James Crombie and Bloomberg Intelligence&rsquo;s Mike Holland in the latest Credit Edge podcast. &ldquo;That could be the kind of risk event that may push the market wider for a period of time,&rdquo; he says, referring to credit spreads. They also discuss the AI funding bubble, collateralized loan obligation performance and fallen-angel risk.

LBO Debt Coming Due Is Next Big Test for Credit Markets, Says ICG

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Investors are increasingly wary of lenders who dish out so-called bad PIK, or payment-in-kind interest, to help struggling portfolio companies avoid default, according to Anant Kumar, global investment strategist at Benefit Street Partners, the private credit arm of $1.7 trillion asset manager Franklin Templeton. “If you’re a manager who wants to mask stress in the portfolio by doing that, you can probably fool some of the people some of the time,” he tells Bloomberg News’ Sinead Cruise and Bloomberg Intelligence’s Tolu Alamutu in the latest Credit Edge podcast. “I do think investors will catch on if you see a widespread use of PIK in the portfolio without any resolution.” Those managers will likely undershoot expectations when their next fundraising rolls around, Kumar says. The trio also discuss the resilience of private credit illiquidity premia, the specter of inflation and how an industry transparency push is forcing firms to address dubious marks faster than ever before.

Investors are increasingly wary of lenders who dish out so-called bad PIK, or payment-in-kind interest, to help struggling portfolio companies avoid default, according to Anant Kumar, global investment strategist at Benefit Street Partners, the private credit arm of $1.7 trillion asset manager Franklin Templeton. &ldquo;If you&rsquo;re a manager who wants to mask stress in the portfolio by doing that, you can probably fool some of the people some of the time,&rdquo; he tells Bloomberg News&rsquo; Sinead Cruise and Bloomberg Intelligence&rsquo;s Tolu Alamutu in the latest Credit Edge podcast. &ldquo;I do think investors will catch on if you see a widespread use of PIK in the portfolio without any resolution.&rdquo; Those managers will likely undershoot expectations when their next fundraising rolls around, Kumar says. The trio also discuss the resilience of private credit illiquidity premia, the specter of inflation and how an industry transparency push is forcing firms to address dubious marks faster than ever before.

Investors Keeping Score on 'Bad PIK', Benefit Street Partners' Kumar Says

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Data-center debt returns are falling, risk is rising and there’s uncertainty over what the properties may be worth in the long run, Wellington Management says. “We think a lot about that replacement value when evaluating data centers,” Sonali Wilson, the $1.3 trillion manager’s lead investment director for private credit, tells Bloomberg News’ James Crombie and Bloomberg Intelligence’s David Havens in the latest Credit Edge podcast. “Today, I’ll say — not every situation — but, by and large, it’s a pass,” she says. They also discuss commercial real estate investment strategies, how to position for AI disruption and why Wellington is building out a private-debt platform now.

Data-center debt returns are falling, risk is rising and there&rsquo;s uncertainty over what the properties may be worth in the long run, Wellington Management says. &ldquo;We think a lot about that replacement value when evaluating data centers,&rdquo; Sonali Wilson, the $1.3 trillion manager&rsquo;s lead investment director for private credit, tells Bloomberg News&rsquo; James Crombie and Bloomberg Intelligence&rsquo;s David Havens in the latest Credit Edge podcast. &ldquo;Today, I&rsquo;ll say &mdash; not every situation &mdash; but, by and large, it&rsquo;s a pass,&rdquo; she says. They also discuss commercial real estate investment strategies, how to position for AI disruption and why Wellington is building out a private-debt platform now.

Wellington Passes on Data Center Debt, Questioning Long-Term Value

https://api.omny.fm/orgs/e73c998e-6e60-432f-8610-ae210140c5b1/clips/8370f325-6c71-41dd-adb0-b490014b1ea8/transcript

SpaceX Bondholders Face Huge Key Person Risk on Their Elon Musk Trip

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