This past week Tesla filed plans (ABS-15G) with the U.S. Securities and Exchange Commission to issue bonds backed by it’s leases on its cars. Tesla will be establishing a Tesla Auto Lease Trust and they plan to price the bonds early next week. The initial transaction (2018-A) will be underwritten by Citigroup, Deutsche Bank and Bank of America Merrill Lynch.
You can check out the ABS-15G filing from Tesla here, SEC filing.
The Financial Times (behind paywall) notes:
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.
As I shared earlier in the article, Tesla announces Feb 7 as Q4 earnings results date, here’s what to expect, Tesla will be reporting earnings on Feb 7 and one of the key highlights will be cash balance. This extra $546M in new funding will help add to Tesla’s cash balance and help them through the Model 3 production ramp. It remains to be seen if Tesla will need additional cash through a new capital raise or not.