Tesla to extend Model 3 production through debt funding

Tesla intends raising US$1.5 billion in debt to expand Model 3 production

It won’t raise more capital through equity, but is considering another round of debt through senior notes, Electrek says.

Tesla says it intends to offer, “subject to market and other conditions, $1.5 billion in aggregate principal amount of its senior notes due 2025 (the ‘Notes’)”.

“The Notes will be senior unsecured debt obligations of Tesla. The interest rate, redemption prices and other terms of the Notes are to be determined,” the company says.

“Tesla intends to use the net proceeds from this offering to further strengthen its balance sheet during this period of rapid scaling with the launch of Model 3, and for general corporate purposes.”

Last week, Tesla announced it planned to spend about US$2 billion in capital expenditures during the second half of the year as it increases Model 3 production.

At the end of the last quarter, Tesla had a cash position of US$3 billion, but chief executive officer Elon Musk has said he wants to keep it over US$1 billion, so debt raising was a possibility to prevent rising expenditure taking too large a cash chunk, Electrek reports.

Tesla expects most of the money will help boost production capacity from about 100,000 cars annually to 500,000 by the end of 2018.

The company hopes to increase its revenue to more than US$20 billion annually.