Tesla Wants to Raise $1.5 Billion for Model 3 Production

08 August, 2017, 00:26 | Author: Alicia Barber
  • Tesla Model 3 out the assembly line is seen in this undated handout

Tesla CEO Elon Musk maintained his stance on the company's ability to deliver on its earlier promised model 3 production ramp up. The company has seen its share price climb 67 percent this year, which would offset the impact of any stock sale to a large extent, but Elon Musk and the leadership team apparently believe that raising debt would sit better with Wall Street. Unlike Tesla's last fundraising, which used convertible notes, the new notes offering would not dilute equity holders.

It's not surprising, but is certainly noteworthy that Tesla (TSLA) announce Monday it is selling $1.5 billion in senior unsecured notes.

But investors remained focused on Tesla's long-term potential. Both ratings are speculative-grade, or "junk".

Comparing it to other electric vehicles now in the market under the same price bracket, the closest competitor to the Model 3 is the Chevrolet Bolt, which starts at $37,495 before incentives.

The automaker's debt load increased significantly previous year when it bought solar panel maker SolarCity. Based on Tesla's production plans, the $7,500 federal tax credit for electric vehicle buyers is likely to start phasing out in mid-2018, before disappearing entirely in mid-2019.

Bank of England holds rates for another month, but cuts growth forecasts
On Thursday, the Bank said it saw GDP growth of 1.7 per cent this year, down from the 1.9 per cent it projected in May. But he said the United Kingdom was "a little bit" better placed to cope with an interest rate rise.

But prospective investors in this deal will just get the yield - and perhaps not enough to compensate for the risk, Flaherty said. Investors desperate for income have depressed the yield gap between single-B-rated junk bonds and United States Treasury bonds by almost 2 percentage points over the past year, to 3.59 points, according to Bank of America Merrill Lynch.

Tesla recently started installing solar roofs and is pairing that business with sales of Powerwall batteries that can store that energy and power homes. The interest rate, redemption prices and other terms of the Notes are to be determined. The company receives about 1,800 net orders a day for its mass-market electric auto, Musk told investors on Wednesday, putting total net reservations at 455,000.

Musk says they are building the highly anticipated auto as fast as possible - 5,000 units/week as of right now with a goal of 10,000 units/week by the end of 2018.

The company reported $3.04 billion in cash and equivalents at the end of the second quarter and $7.12 billion in long-term debt and $2.26 billion in other long-term liabilities.

"We expect Model S and Model X deliveries to increase in the second half of 2017, as compared to the first half of the year", Tesla said.

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