- The yield on the company's well-subscribed August $1.8B 8-year bond offering spiked up by about 50 basis points over the last week, writes Liam Denning at Bloomberg.
- To review, this paper was initially priced at a very fancy premium to its single-B peers - its yield at offering time about 75 basis points less than the benchmark index. That gap has steadily narrowed since, and this week the flip was complete - the Tesla bonds at 6.12% now yield a modest premium to the single-B index.
- Makes sense, writes Denning, as Tesla - trying and failing to ramp up mass production of the Model 3 - has burned through 80% of the cash raised in public markets since March.
- CreditSights' Hitin Anand notes Navistar priced $1.1B of bonds this week to yield 6.625%. While Navistar at CCC+ is rated lower than Tesla (NASDAQ:TSLA), it actually has positive cash flow from operations. Anand: There's "no way" Tesla's paper should be yielding less than Navistar.
- Denning reminds that Tesla has a big backstop in its stock. With a market cap of $50B, the company can always raise equity in a pinch. If a stock price plunge took that option away, acquirers would likely be the next backstop.
Original article