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posted by martyb on Friday November 09 2018, @10:38AM   Printer-friendly
from the big-loan-and-mini-big-rocket dept.

After Goldman Balks, Musk Turns to BofA to Handle SpaceX Loan

Elon Musk frequently makes outrageous requests of his staff in his quest to remake global transportation and colonize Mars. But the terms he wanted on a loan for SpaceX were too much even for his closest ally on Wall Street. As recently as last week, Goldman Sachs Group Inc. had been canvassing investors for interest in $500 million of Space Exploration Technologies Corp. debt. By the time interested parties showed up Wednesday at the Four Seasons hotel in midtown Manhattan for a breakfast meeting, Bank of America Corp. was running the show for a $750 million deal.

The switch surprised bankers and investors, as Goldman is widely viewed as the Wall Street firm with the closest relationship to Musk. It helped take Tesla Inc. public in 2010, led a $1.8 billion bond sale last year and advised on his short-lived attempt to take the electric carmaker private for $420 a share. While Bank of America has a lending relationship with SpaceX, it has been shying away from some of the riskiest corners of the corporate-debt market.

Goldman balked when SpaceX, a first-time issuer, wanted wide latitude to raise additional debt in the future, according to people with knowledge of the matter, who asked not to be identified because the discussions were private. The hesitation highlights uneasiness among banks that have been challenged by regulators over the risks they're taking in the $1.3 trillion leveraged-loan market. Insatiable investor appetite for floating-rate debt has allowed heavily indebted companies to extract more concessions from lenders.

Also at Reuters and Axios.

SpaceX plans to build a "mini-BFR ship" to replace the usual second stage of the Falcon 9 rocket, ahead of late 2019 testing of the actual BFR/BFS. For now, this is intended only to test technologies for the BFR, such as the heat shield and "mach control surfaces". The new second stage will not be able to land propulsively, may not carry any payloads, and may only be used for a single test:

The goal for the modification is June 2019, Musk said in a follow up tweet. [...] [In September], SpaceX president Gwynne Shotwell said she expected the BFS to begin short, unmanned "hopping" tests in late 2019. This new timeline for a mini-BFR would fit perfectly with these tests.

In a follow up tweet, Musk said the tests would specifically look at how the mini-BFR's heat shield and mach control surfaces will hold up under the duress of launch and flight, elements that are difficult to test without actually escaping the Earth's orbit.

Also at Space News.


Original Submission

Related Stories

BFR Renamed; Elon Musk's Use of Cannabis to Blame for NASA Safety Review at SpaceX and Boeing 58 comments

SpaceX CEO Elon Musk's use of cannabis during an interview with Joe Rogan has led to safety reviews at both SpaceX and Boeing:

In addition to spurring problems for the car company Tesla, Elon Musk's puff of marijuana in September will also have consequences for SpaceX. On Tuesday, The Washington Post reported that NASA will conduct a "safety review" of both of its commercial crew companies, SpaceX and Boeing. The review was prompted, sources told the paper, because of recent behavior by Musk, including smoking marijuana on a podcast.

According to William Gerstenmaier, NASA's chief human spaceflight official, the review will be "pretty invasive" and involve interviews with hundreds of employees at various levels of the companies, across multiple worksites. The review will begin next year, and interviews will examine "everything and anything that could impact safety," Gerstenmaier told the Post.

[...] One source familiar with NASA's motivations said the agency has grown weary of addressing questions about SpaceX's workplace culture, from the long hours its employees work to Musk's behaviors on social media. "SpaceX is the frat house," this source said. "And NASA is the old white guy across the street yelling at them to 'Get off my lawn.'"

The "Big Falcon/Fucking Rocket" (BFR) has been renamed. The upper stage will be called Starship, while the booster will be called Super Heavy:

SpaceX CEO Elon Musk tweeted late Monday night that he has renamed the company's largest (and yet to be built) BFR rocket to Starship. Or more precisely, the spaceship portion will be called Starship. The rocket booster used to propel Starship from Earth's gravitational grasp will be called Super Heavy.

Plans to add a "mini-BFS" second stage to the Falcon 9 were scrapped less than 2 weeks after they were announced. Yet another design change for the BFR/Starship was also hinted at:

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  • (Score: 0) by Anonymous Coward on Friday November 09 2018, @11:22AM (2 children)

    by Anonymous Coward on Friday November 09 2018, @11:22AM (#759802)

    This submission seems to be all over the place.

    First, it's about some loan to SpaceX. Well, SpaceX is private so financials are private. How are we suppose to know anything there besides rumors?

    Not sure what this financing has to do with mini-BFR, but whatever. I just wonder if BFR is not going to become the Project v2.0 problem for SpaceX.

  • (Score: 3, Interesting) by MichaelDavidCrawford on Friday November 09 2018, @12:50PM (1 child)

    by MichaelDavidCrawford (2339) Subscriber Badge <mdcrawford@gmail.com> on Friday November 09 2018, @12:50PM (#759832) Homepage Journal

    This is why some predict a collapse: as interest rates go up, more and more companies will be unable to make their payments

    Years of effectively zero rates led many companies to take on heavy debt

    --
    Yes I Have No Bananas. [gofundme.com]
    • (Score: 1) by khallow on Friday November 09 2018, @01:50PM

      by khallow (3766) Subscriber Badge on Friday November 09 2018, @01:50PM (#759844) Journal
      Could be - depends on how much of the debt incurred has adjustable interest rates. A counter factor here is that higher interest rates also curb the demand for more debt. My view is that while debt might kill a bunch of companies during the next downturn, it's probably not going to be the cause of the downturn.
  • (Score: 0) by Anonymous Coward on Friday November 09 2018, @02:19PM (3 children)

    by Anonymous Coward on Friday November 09 2018, @02:19PM (#759854)

    Ok, so we want to fund a remarkable sequence of technology developments

    Working electric cars (Disruptive to car industry, makes an easy customer to sell out to)
    Cheap access to LEO (Ditto, old school space)
    World wide Internet sat net (Not really disruptive because there is nothing at that scale to disrupt)
    Big launch capability
    Mars something, but not sure what yet

    Historically, an innovative company would make something great, and use the profit to fund the next great thing.
    For this sequence, that could take a lifetime and then some, but along the way you make both a sustainable technological and financial thing.
    The technology is amazing, but I wonder if the financials are up to the task.
    It is expected that the process should involve robbing Peter to pay Paul, but where is Peter, and why are there 5 Pauls?

    Given only one lifetime, is the goal to just get to Mars no matter what,
    or to leave behind a more self sustaining thing?

    Options:
    Given the launch market, perhaps the launch price is too low?
    Politically, there is much more return funding X development over ULA, but we seem to be doing the reverse.
    It sure would be neat if Tesla were deeply in the black.
    What's the boring stuff about anyway? If it's about what to do on Mars, then it might be a bit early if it is costing much.
    What early cash flows are possible from a small sat net?

    • (Score: 3, Interesting) by Immerman on Friday November 09 2018, @02:50PM

      by Immerman (3985) on Friday November 09 2018, @02:50PM (#759872)

      >World wide Internet sat net (Not really disruptive because there is nothing at that scale to disrupt)

      Umm, seems to me it would be pretty disruptive to pretty much all terrestrial internet providers. There might not be a single business to rival the scale, but the industry at a whole certainly does.

      After all, if you build a LEO network to serve rural Africa and Asia, it can also serve most of the developed world at little additional cost, you just need more terrestrial uplinks on this side of the planet. And if they can maintain even razor-thin margins in the developing world, they should be able to easily undercut pretty much all first-world ISPs while maintaining huge profit margins. Big if perhaps - they may be counting on us to subsidize the rural market - after all, it works both ways - if you've got the network for the developed world, it costs little to also serve the developing world, and any sales there, no matter how cheap, are almost pure profit.

    • (Score: 2) by takyon on Friday November 09 2018, @03:07PM

      by takyon (881) <reversethis-{gro ... s} {ta} {noykat}> on Friday November 09 2018, @03:07PM (#759878) Journal

      Working electric cars (Tesla) have little to do with SpaceX. They are two separate companies and will stay that way. Flying a Tesla on a Falcon Heavy was a nice bit of cross promotion, but Tesla's successes or woes should not affect SpaceX's ability to raise capital. Likewise, The Boring Company doesn't have anything to do with SpaceX at this point, even if tunneling equipment and hyperloops are intended to be used on Mars much later.

      SpaceX charges NASA a lot more for cargo flights to the ISS, and will charge even more for crewed flights to the ISS. But NASA's involvement with the ISS could end sometime between 2024 and 2030. Back in 2008, NASA gave SpaceX a $1.6 billion contract after a single successful flight of the Falcon 1, saving the company from bankruptcy. In retrospect, that was money well spent.

      SpaceX may be able to make some money off of the smallsat market. A flight scheduled for November 19 will carry around 70 satellites:

      https://arstechnica.com/science/2018/11/kazakhstan-chooses-spacex-over-a-russian-rocket-for-satellite-launch/ [arstechnica.com]

      The BFR technologies, if realized, will be incredibly valuable to whomever has access to it. Theoretically, you would only need one BFR per launch site. You could launch it, put a payload in orbit, land it, and repeat the next day. With in-orbit refueling, you have options for getting large payloads to the Moon, Mars, etc. The cost per kilogram will be disruptively low.

      If SpaceX managed to get the BFR up and running, but went bankrupt, someone would buy up the technology and talent (ULA for example). SpaceX might even get a bailout like the automotive industry did, and it could still save taxpayers billions over other options (NASA, Air Force, NRO, etc. are all launching stuff). Even if SpaceX never innovates again after BFR, and they just new ones out all the time, they could coast on the success of a fully reusable rocket for a long time. Effective competitors to the BFR may start to appear only after 2030.

      --
      [SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
    • (Score: 1) by khallow on Friday November 09 2018, @03:16PM

      by khallow (3766) Subscriber Badge on Friday November 09 2018, @03:16PM (#759885) Journal

      World wide Internet sat net (Not really disruptive because there is nothing at that scale to disrupt)

      Rural communication - a few years from communication mostly by foot or post to internet.

  • (Score: 2) by tangomargarine on Friday November 09 2018, @04:33PM

    by tangomargarine (667) on Friday November 09 2018, @04:33PM (#759918)

    The Big Falcon Rocket (officially shortened to BFR) is a privately funded fully reusable launch vehicle and spacecraft system in development by SpaceX. The overall space vehicle architecture includes both launch vehicles and spacecraft, as well as ground infrastructure for rapid launch and relaunch, and zero-gravity propellant transfer technology to be deployed in low Earth orbit (LEO). The payload capacity to Earth orbit of at least 100,000 kg (220,000 lb) makes BFR a super heavy-lift launch vehicle. The first orbital flight is tentatively planned for 2020.[6]

    https://en.wikipedia.org/wiki/BFR_(rocket) [wikipedia.org]

    So apparently a "mini-BFR" means that instead of a second stage to the rocket, they build the thruster equivalent into the ship itself.

    How the term "mini big rocket" makes any sense, and how this is meaningfully different from a two-stage rocket, is left as an exercise for the reader.

    --
    "Is that really true?" "I just spent the last hour telling you to think for yourself! Didn't you hear anything I said?"
  • (Score: 2) by legont on Friday November 09 2018, @04:48PM

    by legont (4179) on Friday November 09 2018, @04:48PM (#759927)

    Goldman Sachs Group Inc. had been canvassing investors for interest in $500 million of Space Exploration Technologies Corp. debt. By the time interested parties showed up Wednesday at the Four Seasons hotel in midtown Manhattan for a breakfast meeting, Bank of America Corp. was running the show for a $750 million deal.

    Goldman was quietly discouraging the most trusted clients.

    --
    "Wealth is the relentless enemy of understanding" - John Kenneth Galbraith.
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