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Tesla (NASDAQ: TSLA) is seeking to attract potential investors for a new $1.8 billion securitization of its electric vehicle leases. This is the largest venture of its kind since the company began the practice in 2014, according to Fitch Ratings. The move follows the Federal Reserve's recent interest rate hike, which has not deterred Tesla drivers. Consumers are still eager to drive the brand's vehicles.

According to investing.com, the financing strategy involves converting a significant portion of Tesla's leases into bonds. The company aims to generate interest in approximately $1 billion of notes divided into five classes of bonds, rated from Triple A to Double A. Lower-rated tranches, however, will not be offered for sale.

Proceeds from this securitization will allow Tesla to enter into additional leases, providing an alternative source of financing outside of the corporate bond market. “Tesla bonds have yielded investor coupons ranging from 5.6% to 6.4%. In contrast, a 2021 bond deal offered only 0.16% to 1% amid near-zero Federal rates. However, corporate borrowing costs have risen in line with interest rates,” wrote investing.com.

The leases involved in this new Tesla deal are supported by prime borrowers paying a weighted average interest rate of 5.06%, a slight increase from the 4.9% seen in an earlier Tesla deal this year.

© 2023, Eva Fox | Tesmanian. All rights reserved.

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This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Eva Fox, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.