finance news

Tesla plans $780 million bond agreement of its electric vehicle leases

Tesla plans $780 million bond agreement of its electric vehicle leases
Tesla plans $780 million bond agreement of its electric vehicle leases

Tesla Inc. has been making it to the headlines almost every day from the past several days for varied reasons, whether on it becoming the most valued automaker or its founder becoming the world’s seventh-richest person. Now, there is another snippet about the Silicon Valley car maker trending all over again. 

Reportedly, an electric automaker is looking for investors in an eight-tranche bond agreement of its electric vehicle leases, marking its first debt deal of the year.

According to sources familiar with the knowledge of the matter, Tesla’s Model X SUVs and Model S make up half of the collateral for bond agreement while Model S sedans comprising roughly the remainder. Bonds have top AAA rating from Moody’s Investors Service and mature in less than or equal to 2.7 years.

The deal will also be the company’s first asset-backed sale during the COVID-19 pandemic, which has significantly impacted the American economy

During the previous major crisis, American consumers amazed lenders by prioritizing their vehicle payments over their home mortgages. This consumer behavior has resulted in a few credit issues backed by vehicle leases during that cycle. This fact could help to increase the demand for Tesla’s debt.

Tesla has become the most valuable company amid the pandemic. Tesla's average market value over the past few months surged more than USD 150 billion last week. This allows Elon Musk to gain an extra USD 2.1 bn through a newly launched 1.69 mn stock options. However, he must wait for a minimum of five years to sell them for this to happen.

The pay package authorized stakeholders in 2018 gives the Founder access to 20.3 mn shares, divided into 12 equal parts of 1.69 million shares. With this package, Musk could create 55 billion dollars if the company’s goals are met.

Source Credit - https://www.marketwatch.com/story/tesla-plans-780-million-bond-deal-pegged-to-vehicle-leasesits-first-such-offering-during-the-pandemic-2020-07-27