By Davide Scigliuzzo
NEW YORK (IFR) - Tesla (NASDAQ:TSLA) saw its bonds and stocks fall sharply Tuesday on a double-dose of bad news: a downgrade from Moody's and word of an investigation into the fatal crash of one of its vehicles.
The electric car company's outstanding junk bond, a 5.3% 2025 deal that priced in August 2017, hit its lowest-ever level of 89 cents on the dollar, according to data from MarketAxess.
It was already at its previous low of 91 cents in the afternoon before Moody's announced it had lowered Tesla's corporate rating one notch to B3.
The rating agency cited the "significant shortfall" in the production rate of its Model 3 sedan, whose rollout the US$1.8bn bond issue was largely intended to finance.
Moody's warned it could downgrade the company further if Tesla falls behind the updated production targets for the car, and changed the outlook on Tesla to negative from stable.
It also lowered the rating of the junk bond to Caa1, becoming the first agency to push the debt into the lowest rungs of ratings above default.
Moody's said Tesla will need to raise more than US$2bn of capital in the near term to cover its heavy cash burn and US$1.2bn of convertible debt maturities through early 2019.
S&P rates the company B-, a level on a par with the new Moody's B3 rating.
The downgrade hit at the end of a trading session that had seen Tesla's stock fall 8.2% to US$279.18 per share after the National Transportation Safety Board said it would investigate the fatal crash of a Tesla vehicle in California last week.
The stock plunge wiped approximately US$4.2bn off of Tesla's market capitalization.
Tesla stock was trading at more than US$357 per share when the company sold its junk bond last year.
That bond is expected to be the first of several in coming years, as the company switches away from equity issuance to fund its ambitious growth plans.
But it has faced significant delays in scaling up production of its Model 3 electric vehicle.