Tesla plans $ 780 million bond deal for vehicle leases – its first offering during the epidemic


Telsa Inc., after reporting an astonishing second-quarter profit, plans to raise $ 779.53 million in the asset-backed bond market this week.

Palo Alto, California. The based electric-vehicle manufacturer is offering eight classes of bonds to investors that mature in 2.7 years or less and take a mostly AAA rating from Moody’s Investors Service.

According to Moody’s data, this is the company’s first such debt deal of the year after raising funds in a similar manner once in the last year and twice in 2018.

But it will also be Tesla’s TSLA,
+ 8.65%
Sales of the first asset-backed bonds during the global epidemic, with Americans in a deep economic downturn brought about by socio-economic sanctions and other orders designed to limit the spread of contagion.

Leases on Tesla’s Model S sedan and Model X SUV make up half of the collateral for the bond deal, according to Moody’s, with the relatively less expensive Model 3 sedan comprising almost the remainder.

During the last major crisis, American consumers surprised lenders by prioritizing their auto payments over their home mortgages, resulting in some credit issues on bonds backed by vehicle leases during that cycle, but instead one from Home Foreclosures There was a wave. This fact may help reduce Tesla’s debt demand.

Meanwhile, Tesla’s wealth has become iconic amid the epidemic that has shaken most other industries.

Last week, Tesla shocked investors by reporting earnings of $ 104 million, or 50 cents per share, in the year-ago quarter, with losses of $ 408 million, or $ 2.31 per share, in the second quarter.

Tesla shares rose 8.7% on Monday, raising the stock to 268% this year, as high-technology stocks led the major US equity benchmarks, including the Dow Jones Industrial Average DJIA,
+ 0.43%,
Even policymakers in Washington participate in the next round of pandemic aid, and infections arising from the novel strain of coronovirus gather as steam.

related: Here are 5 reasons why the epidemic has not crashed the US housing market

In terms of pricing, the 1.1-year portion of the largest AAA-rated, Tesla bond deal is being offered at a risk-free benchmark for investors at a spread of about 50 to 55 basis points, tracking an investor proposal accordingly.

According to Bofo Global data, pricing may change based on bond demand last week, but current levels would indicate a significant premium on generic 3-year prime auto lease bonds of around 40-basis-points.

Spread is the level of compensation that investors earn on bonds on a risk-free benchmark such as the US Treasury TMUBMUSD10Y,
0.622%,
Wide spread often indicates a high risk of default.

Tesla did not immediately respond to a request for comment.

Moody’s said the economic shock of the “rapid outbreak” of the coronavirus epidemic and related government shutdowns was considered in its analysts of Tesla’s new bond sales, which comes with larger credit cushions that protect bonds than ever before helps.

However, Moody’s also said that a gradual economic recovery is expected to see it in the second half of the year “depending on whether governments protect public health and avoid moving into infections Can reopen their economies. “

On Monday, the head coordinator of the White House Task Force formed to monitor the response to the epidemic, Dr. Deborah Birks repeatedly urged Kentucky and other states battling the growing transition to shut down and limit indoor gatherings.

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