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Tesla plans to raise $1.5 billion through a high-yield junk bond offering, with road shows expected to begin Monday. The fresh cash would help ramp up production of the recently released Model 3 sedan.
Tesla said last week it anticipates $2 billion in capital expenditures during the second half of the year to support production of the Model 3. Obviously, as an upstart carmaker, Tesla has needed to make a significant investments in infrastructure, but its current estimates for production and service expansion call for an unprecedented spend.
The company has $3 billion in cash, which CEO Elon Musk has said he would like to keep above $1 billion. Raising debt will help protect that cash position. The company has yet to make an annual profit.
Following Tesla’s announcement, Standard & Poor’s issued a “B-” rating for the bond issue, continuing a negative outlook for the company. S&P also maintained its “B-” long-term corporate credit rating on Tesla.
Tesla aims to scale production of about 100,000 cars per year to 500,000 by the end of next year.