Homepage / Technology / Tesla debt offering raised to $1.8 billion, $300 million more than planned, on high demand
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Technology

Tesla debt offering raised to $1.8 billion, $300 million more than planned, on high demand

Tesla launched its first high-yield junk bond offering Friday at $1.8 billion, $300 million more than expected and at a yield of 5.25 percent, according to Informa Global Markets.

The greater-than-expected amount indicated high demand. Pricing was expected later in the afternoon.

Earlier in the week, Elon Musk’s luxury electric car maker was expected to raise at least $1.5 billion to accelerate production of its new Model 3.

The offering was expected to be eight-year notes, noncallable for three years, and Goldman Sachs as the lead underwriter. S&P rated the bonds negative B and Moody’s B3, analysts said.

Tesla has burned through billions of dollars — $1.2 billion in cash in the second quarter alone— in its effort to develop electric cars.

The debt pricing came amid a drop this week in the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), down more than 1 percent and less than a percent higher for the year as of Friday afternoon as geopolitical risks soured the appetite for risky assets.

That made it all the more surprising that Tesla would be able to raise more money than expected and at such a reasonable yield for a company with a risky balance sheet.

It “speaks to the sheer insanity found in the high yield market to have a deal like this upsized with terms so unappealing to investors,” said Larry McDonald, author of The Bear Traps Report newsletter. “The deck is stacked for Tesla in bond deal terms, congrats to Elon Musk.”

Source: Tech CNBC
Tesla debt offering raised to .8 billion, 0 million more than planned, on high demand

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