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August 8, 2017

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Tesla seeks US$1.5b in bond issue

TESLA Inc said yesterday it would raise about US$1.5 billion in a bond offering as the US electric car maker ramps up production of its newest sedan, the Model 3.

The debt offering marks Tesla’s debut in the junk-bond market and the company was set to start roadshows yesterday, IFR reported, citing lead bankers on the deal.

Elon Musk-led Tesla is counting on the Model 3, its least pricey car, to become a profitable, mass market manufacturer of electric cars.

Pre-orders for the Model 3, which has a US$35,000 base price, have surpassed half a million, averaging about 1,800 per day since its launch late last month.

At the launch, Musk however warned that Tesla would face months of “manufacturing hell” as it increases production of the sedan.

Tesla had over US$3 billion in cash on hand at the end of the June quarter, compared with US$4 billion as of the previous quarter and US$3.25 billion a year earlier.

Tesla’s cash burn, expected to top US$2 billion this year, has prompted short-sellers like Greenlight Capital’s David Einhorn to bet against the Palo Alto, California company.

Musk said last week the company was considering debt to expand cash on hand.

Goldman Sachs, Morgan Stanley, Barclays, Bank of America Merrill Lynch, Citigroup, Deutsche Bank and RBC are the bookrunners on the bond offering, IFR reported.

Shares of Tesla, which have risen 67 percent this year, were largely unchanged in premarket trading.


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