Tesla is set to raise $1.5bn in its bond market debut as it revs up Model 3 production

 
Courtney Goldsmith
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Telsa Reports Quarterly Earnings
Tesla's shares have soared this year on investor expectations of the Model 3 (Source: Getty)

Luxury electric car maker Tesla will raise around $1.5bn (£1.15bn) through its first high-yield junk bond offering as Elon Musk prepares to expand production of the Model 3 car.

The firm said it will use the proceeds from the offering to strengthen its balance sheet during a period of "rapid scaling" with the launch of the Model 3, and for general corporate purposes.

The Model 3, Tesla's most affordable car yet, is expected help turn the company into more of a mass-market car maker. The car will retail at $35,000, which is about half the cost of the base Model S. Expectations around its performance have helped the company's shares to rocket 67 per cent this year to rise above US car giants General Motors and Ford.

However, loss-making Tesla's stock is a top pick among short-sellers, and funding the Model 3's production has taken a toll on the company's balance sheet.

The firm plans to make 500,000 vehicles in 2018 and a million in 2020, but last year it produced just around 84,000 cars and sport utility vehicles.

Last week, Tesla said it had 455,000 net pre-orders for the Model 3 and was averaging 1,800 daily reservations for the car since it launched late in July.

After Tesla's announcement today, Standard & Poor reaffirmed a negative outlook, giving the car maker a "B-" junk rating for the bond issue. S&P also maintained a "B-" long-term corporate credit rating on Tesla, while Moody's gave a junk "B3" rating to the bond issue and said the company's rating outlook was stable.

Tesla's New York-listed shares were trading down 0.14 per cent at $356.40 in US afternoon trading.

Read more: Tesla's shares jump with "overwhelming" Model 3 response

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