Tesla Nets The Proceeds From The Largest US Bond Offering In Over 2 Years

Tesla Nets The Proceeds From The Largest US Bond Offering In Over 2 Years

A week after Tesla beat the industry estimates for profit in their 4th quarter ($46 million ex-items), the company detailed their plans to build a "Giga factory."

Tesla's Giga Factory Will Be Located in One Of These 4 States - Let The Bidding Begin!

Tesla's Giga Factory Will Be Located in One Of These 4 States - Let The Bidding Begin!

This factory, which is to be located in one of 4 US states (Arizona, Texas, Nevada and New Mexico), will someday be able to produced enough packs to supply 500,000 cars.

But to pay for this factory (estimated to cost as much as $5 billion - with Tesla kicking in $2 billion of that over 5 years), as well as development of the next gen car, Tesla announced they were going to have a convertible bond sale in order to raise $1.6 billion.

Turns out the market liked Tesla's terms - and future prospectus - as investor demand was incredibly strong according to the sale report from FT.

In the end the offering was raised to $2 billion and with a provision for an over-allotment that could make the offering reach $2.3 billionAlways nice to get an extra $400 to $700 million that you didn't ask for.

Details of the offering:  Tesla sold $800 million of their 5 year note and $1.2 billion in the 7 year.  The 5 year notes have a coupon payment of 25 basis pts, with the 7 year paying 125 basis points.  Both the 5 and the 7 have an equity conversion premium of 42.5% (ewhich quates to about $360 per share).  At the underwriter's discretion, the offer can expand by a further $300 million.

Of note:  Tesla's previous offering last May was also oversubscribed, and was expanded twice.  Those notes carried 1.5%, with a 35% conversion.

This deal is the largest US convertible bond sale in over 2 years.

Financial Times