Featured Company News - Tesla to Sell High-yield Bonds; Increases Level of Debt Raised to $1.8 Billion

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Accesswire 15-Aug-2017 7:20 AM
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LONDON, UK / ACCESSWIRE / August 15, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for electric car manufacturer Tesla, Inc. (NASDAQ: TSLA), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=TSLA. The Company announced on August 11, 2017, that it plans to issue and sell senior notes valued at approximately $1.80 billion. For immediate access to our complimentary reports, including today's coverage, register for free now at:
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These senior notes will be due in 2025 and will have an annual interest rate of 5.30%. The current unsecured senior notes offered are 20% higher than the Company's proposed offering of $1.50 billion senior notes on August 07, 2017. The deal is expected to close on August 18, 2017, and is subject to closing conditions. The opportunity to invest in the Company's senior notes is being offered to major institutions and not private investors.
The statement from Tesla reads:
"Tesla intends to use the net proceeds from this offering to strengthen its balance sheet during this period of rapid scaling with the launch of Model 3 and for general corporate purposes."
This is the first time that the Company is directly raising funds via debt and not via issue of convertible bonds which can later be changed into the Company's shares. Tesla plans to raise funds without diluting its equity. This has increased investor confidence and hence the offer of senior notes was upsized.
On August 07, 2017Tesla had announced that it proposed to offer senior notes valued at approximately $1.5 billion and which would be due in 2025. These notes were to be treated as unsecured debts of the Company. At that time the interest rate, redemption prices, and other terms of the senior notes were yet to be finalized.
Background
The Company released its Q2 2017 financial performance report on August 02, 2017, also revealing that it had focused its efforts on the production of the Tesla's Model 3 vehicle. It is the affordable sedan from the Company's vehicle line-up and has a $35,000 base price. Tesla's Model 3 has received unprecedented response from customers and the Company is receiving an average of 1,800 net reservations per day. The Company has also been receiving great response and reservations for its Model S and Model X vehicles.
The Company has been working at breakneck speed to ramp up its production so that it can meet delivery deadlines. The Company expects the Model 3 production to follow the S-curve wherein the production will have a slow start before it grows exponentially and then again tapers down after demand peaks. It has plans to produce and deliver nearly 1,500 vehicles in Q3 2017 and then increase it to achieve a run rate of 5,000 vehicles per week by the end of 2017, followed by 10,000 vehicles per week in 2018. The Company has ambitious plans of producing 500,000 all-electric vehicles in 2018, including the Model 3 sedan.
The Company is also simultaneously ramping up production of its other popular as well as upcoming models including Model S sedan, Model Y crossover, and Model X SUV.
Scaling up production would require large scale investments. Tesla's resources have been stretched to the maximum as it tries to manage growth in all its business ventures. Some of Tesla's prominent investments include the $2.6 billion acquisition of solar panel maker SolarCity in November 2016, its investments in expanding capacity and safety standards at Freemont California assembly plant, and completing the construction of its Gigafactory in Nevada. The current senior notes offering is expected to increase the debt of the Company further, however, the silver lining is that the debt is not secured giving the Company the option of going back to the capital market to raise more funds if required. Now that the Company has raised funds, the onus of delivering on its promises is the new challenge for Tesla.
Last Close Stock Review

At the closing bell, on Monday, August 14, 2017, Tesla's stock climbed 1.66%, ending the trading session at $363.80. A total volume of 4.51 million shares have exchanged hands. The Company's stock price soared 15.17% in the last three months, 29.65% in the past six months, and 61.25% in the previous twelve months. Moreover, the stock skyrocketed 70.25% since the start of the year. The stock currently has a market cap of $60.30 billion.

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