By Stephen Lacey and Deepa Seetharaman
NEW YORK/DETROIT, May 16 (IFR) - Tesla Motors Inc
boosted the size of its convertible bond by 17 percent to $525
million, the bulk of which will be used to repay the company's
U.S. Department of Energy loan, according to two market sources
close to the situation.
The maker of the Model S electric sedan was also able to
secure more attractive terms for its bond offering than
originally planned due to high demand from investors, the
sources said on Thursday.
Initially, Tesla set out to raise $450 million by selling
senior convertible notes due 2018. Tesla made the announcement
on Wednesday as part of several moves to raise an estimated $830
million in a stock and bond offering.
The increased bond offering means Tesla stands to raise as
much as $944.5 million. The financing is due to price after
market close on Thursday.
This is the latest in a string of positive news for Tesla,
which posted its first quarterly profit last week and got a
near-perfect rating for the Model S from Consumer Reports
magazine. Since May 8, Tesla shares have risen nearly two-thirds
on the Nasdaq.
More than 200 investors participated in a group investor
call, in addition to the series of one-on-one meetings Tesla
management held with investors, according to the sources.
The $450 million five-year convertible bond had been talked
at a coupon between 2 percent and 2.5 percent with a conversion
premium between 30 percent and 35 percent, sources said.
But strong investor demand allowed Tesla to increase the
size of the bond to $525 million and secure more favorable
terms. Price talk on the bonds was revised to a coupon of
between 1.5 percent and 2 percent with the conversion premium
set at 35 percent.
Tesla will use $452.4 million of the net proceeds from the
bond and stock offering to repay the unpaid portion of its $465
million DOE loan with interest.
The loan was extended to Tesla in June 2009 to cover the
cost of engineering and building the Model S, which starts at
$70,000 before a federal tax credit.
Tesla has about $440 million outstanding on its DOE loan,
Tesla spokeswoman Shanna Hendriks said in an email.
Goldman Sachs, Morgan Stanley, JP Morgan are joint
bookrunners on the convertible bond placement, while Goldman
Sachs is sole books on the common stock.
TESLA EYEING $43.2 BLN MARKET VALUE
Tesla shares rose 8.7 percent to $92.25 on the Nasdaq. The
stock's run-up reflects in part covering by short-sellers, who
bet on the stock's decline, analysts and sources said.
Tesla was worth about $10 billion as of Wednesday, more than
the market value of Italian automaker Fiat SpA, the
majority owner of U.S. automaker Chrysler Group LLC.
In a proxy filed last month, Tesla said Chief Executive Elon
Musk has "significant" investment and options in Tesla that can
only be tapped if the company completes its DOE loan project and
meets several performance milestones.
Musk, a billionaire who is also a Tesla co-founder, now gets
paid $1 a year. He now owns more than 33 million shares,
accounting for 27.5 percent of Tesla, according to the proxy.
Those options will become vested if Tesla's market value
increases to $43.2 billion by 2022, putting the 10-year-old car
company on par with General Motors Co, the largest U.S.
automaker, which is worth around $45 billion.
The proxy says Musk must meet 10 operational milestones,
including successfully developing a third-generation Tesla
vehicle that will be priced between $30,000 and $35,000.
This week, Musk personally committed $100 million to buy
Tesla shares. Tesla is selling 2.7 million common shares, with
Musk committed to buying $45 million worth of shares. Musk has
also committed to invest an additional $55 million through a
separate private placement at a later date.