Tesla (TSLA) Plans To Raise ~$780M In Bond Market For EV Leases

by Ma. Claribelle Deveza July 27, 2020

Tesla-TSLA-Bond-Q2-Profit

Featured Image Credit: Jakob Härter/Flickr [CC BY-SA 2.0]

Tesla (TSLA) plans to enter the bond market and raise approximately US$779.53 million this week. Tesla will offer eight classes of bonds to investors, all of which will mature in 2.7 years or less.

Most of the top bonds will carry AAA ratings from Moody’s Investors Service. Thee AAA-rated, 1.1-year Tesla bonds are being pitched to investors at about 50 to 55 basis points over a risk-free benchmark. The pricing for Tesla’s bond deal could change as demand shifts.

According to Moody’s, Model S and Model X leases make up half of the collateral of the bond deal. Model 3 leases make up most of the remaining collateral.

Earlier this month, Tesla reported that it delivered 10,600 Model S and X vehicles and 14% of the deliveries were subject to lease accounting. It delivered 80,050 Model 3 and Model Y vehicles, of which 4% were subject to lease accounting.

During the Q2 Earnings Call, Elon Musk quelled worries about demand amongst analysts. Tesla's price reductions made some analysts wonder about the demand for the company's vehicles during the second quarter. Emmanual Rosner from Deutsche Bank inquired about demand for Tesla’s vehicles, considering the pandemic. Rosner noted the backlog Tesla had from the first quarter.

“Demand is not a problem, definitely not. We do have some production supply chain challenges we're trying to slow right now,” said Musk. “…look, the things that are troubling us right now are not demand, they are just a bunch of firefighting on supply chain and production issues.”

TSLA reported Q2 profit last week during its Earnings Call with US$2.18 adj. EPS, US$6.04 billion in revenue. This would be the first time Tesla raises funds in 2020 during the pandemic.

Moody’s upgraded Tesla’s rating after it posted Q2 profit. The EV automaker’s Corporate Family Rating went up from B3 to B2, its senior unsecured rating changed from Caa1 to B3, and its speculative grade liquidity rating was updated from SGL-3 to SGL-2.








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