Tesla lifts fundraising aim to $1.8bn with debut bond
Tesla is increasing its debut bond deal to $1.8bn as it seeks to finance production of the Model 3 that the electric-car maker has staked its future on.
The eight-year bonds will have a yield of 5.25pc, in line with initial talk, according to a person with knowledge of the matter, who asked not to be identified because the sale is private. Elon Musk's company boosted its offering from the original $1.5bn.
Musk brought his charm offensive to the debt market at a meeting for prospective bond buyers in Manhattan earlier this week. He walked away with orders for $600m after just a few hours, according to investors briefed on the matter. The session, which featured a gleaming blue Model 3 on display, was part of a four-day debt-marketing extravaganza, which included an invitation from Musk for investors to tour the company's assembly plant. The tactics worked, as noteholders are proving willing to overlook the company's negative cash flow and its repeated trips to capital markets to bolster its balance sheet.
People at the Manhattan meeting with Musk this week estimated that the company could wind up paying no more than 5pc on the junk-rated bonds. Tesla's unsecured notes will put bondholders in the same pool as their convertible counterparts, though they won't reap the same upside reward should the Model 3, or any other success, propel the stock even further. Should the company run into execution problems and have to issue secured debt, unsecured holders would be pushed lower down on the capital structure with a lesser priority to get paid back.
The sale was managed by Goldman Sachs, Morgan Stanley, Barclays, Bank of America, Citigroup, Deutsche Bank and Royal Bank of Canada, the person said.