Tesla's $1.8B Bond Sale…Wait, I Though It Was $1.5B?

Tesla seeks $1.5 bn junk bond issue to fund Model 3 production

While the barrage of tweets began as a reply to a Business Insider story, Musk also took a shot at TIME for writing a story based on the same anecdote.

In its first foray into selling pure debt, Tesla offered an eight-year non-call three-year bond that was originally marketed at a size of US$1.5bn. They're citing language that exempts Gigafactory 1 from the usual curbs that would prevent Tesla from using the factory as collateral for even more debt.

Maye Musk, Elon's mother, got into the fray as well, agreeing with her son and calling some of the book's contents "glaringly wrong".

Were Tesla to produce, and sell 500,000 cars per year, the company would likely outsell the BMW, Mercedes, or Lexus brands in the United States. As it states, Elon Musk, Tesla's CEO, has formerly said the Model 3 can not fit more than a 75-kWh battery, but he may have been discussing usable capacity, not always the optimum. "It can get a little weird".

"To carve out an asset, especially one that would be considered a very valuable asset, is a meaningful exclusion", said Alexander Diaz-Matos, an analyst at Covenant Review. "It made sense for Tesla - what they really need is a lot of cash".

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Goldman Sachs acted as left lead, while Morgan Stanley, Bank of America, Citigroup, Deutsche Bank and RBC came in as bookrunners.

Tesla's bond will price later this week after several days of meetings with credit investors, who will weigh factors including the absence of a borrowing history, its lack of profit and its high cash-burn rate against its growth potential and its attractiveness as an environmentally friendly "green" issuer.

The new notes offering will not dilute equity holders. The electric vehicle maker finalized terms for the first-ever sale of high-yield bonds today, and increased the size of the offering.

"If you think about the "early adopter" concept, the same may apply to this bond for certain investors", said Jon Duensing, director of investment-grade credit at Amundi Pioneer, which oversees $82.4 billion.

People at the Manhattan meeting had estimated that the company could wind up paying no more than 5 percent on the junk-rated bonds. Musk offhandedly dismissed concerns about Tesla Model 3 cancellations - orders now stand at about 455,000 compared to Musk's proclamations to the press of about 513,000 preorders - as inconsequential and that original numbers were "just a guess".

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