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


Tesla raised $1.8 billion, $300 million more than expected, in its first high-yield junk bond offering Friday.

The yield of 5.30 percent was slightly higher than the original guidance of 5.25 percent.

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, but strong demand allowed the car maker to raise more, albeit at a slightly higher yield than expected.

Goldman Sachs was the lead underwriter. S&P rated the bonds negative B and Moody’s B3.

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 more than 1 percent drop this week in the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) 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.”

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