The Blue Owl
Endangerous Herbivore
Tesla is raising money:
Tesla plugs into securitisation market for new funds
Tesla plugs into securitisation market for new funds
Electric carmaker Tesla is set to tap a new source of financing to fund its multibillion-dollar expansion, with the issue of a $546m bond backed by customers’ lease payments.
[...]
The newest bond issue will be backed specifically by payments on its fleet of leased vehicles. Tesla provides vehicle leases directly through its own finance arm, and around 12 per cent of automotive revenue in its most recent quarter was tied to new leases rather than outright sales.
The leasing programme has left $3.8bn of vehicles on Tesla’s own balance sheet, and the cost of funding new operating leases consumed $1.1bn of cash in the first nine months of last year.
Investor demand for so-called auto asset backed securities (ABS) — bonds backed by car loans or lease payments — has been revving up, meaning costs have come down for borrowers. Issuance hit a post-financial crisis high in 2017.
The new Tesla ABS is expected to price early next week with a maturity of February 2020, according to multiple people with knowledge of the sale.
[...]
Investors have raised some concerns with the deal, however. Tesla lacks experience managing auto leases and does not have a track record in the securitisation market, some said. The deal will also rely heavily on leases tied to its Model S, whereas more traditional issuers typically use a more diverse portfolio of vehicles. Should anything go wrong with the Model S requiring Tesla to recall cars, investors would take the hit.
[...]
The auto ABS deal is expected to be rated by Moody’s. Deutsche Bank and Citi have been hired as joint bookrunners, with Bank of America Merrill Lynch added as a co-manager.
[...]
The newest bond issue will be backed specifically by payments on its fleet of leased vehicles. Tesla provides vehicle leases directly through its own finance arm, and around 12 per cent of automotive revenue in its most recent quarter was tied to new leases rather than outright sales.
The leasing programme has left $3.8bn of vehicles on Tesla’s own balance sheet, and the cost of funding new operating leases consumed $1.1bn of cash in the first nine months of last year.
Investor demand for so-called auto asset backed securities (ABS) — bonds backed by car loans or lease payments — has been revving up, meaning costs have come down for borrowers. Issuance hit a post-financial crisis high in 2017.
The new Tesla ABS is expected to price early next week with a maturity of February 2020, according to multiple people with knowledge of the sale.
[...]
Investors have raised some concerns with the deal, however. Tesla lacks experience managing auto leases and does not have a track record in the securitisation market, some said. The deal will also rely heavily on leases tied to its Model S, whereas more traditional issuers typically use a more diverse portfolio of vehicles. Should anything go wrong with the Model S requiring Tesla to recall cars, investors would take the hit.
[...]
The auto ABS deal is expected to be rated by Moody’s. Deutsche Bank and Citi have been hired as joint bookrunners, with Bank of America Merrill Lynch added as a co-manager.
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