SolarCity raises $305 million in deal advised by Soros' firm

(Reuters) - Solar panel installer SolarCity Corp SCTY.O, which is being bought by Tesla Motors Inc TSLA.O, on Monday said it had raised $305 million by selling the future cash flows for a portfolio of solar projects to a fund advised by billionaire investor George Soros' hedge fund.

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Shares of the company, which is backed by Tesla founder Elon Musk, were up 7.4 percent at $18.00 in afternoon trading on Monday as investors cheered the solar company’s ability to raise funds to fuel its rapid expansion.

The stock remained far below the $25.37 a share at which Tesla’s stock swap proposal values SolarCity.

The new financing “should help ease (Tesla) shareholders’ concerns regarding (SolarCity’s) cash needs when/if the transaction closes,” R.W. Baird analyst Ben Kallo wrote in a note to clients.

SolarCity’s business model, which hinges on putting up solar panels on residential homes at no upfront cost, requires large amounts of cash to finance its growth. The company has used many innovative financing schemes over the years, including the recent cash equity financing deals in which the company gives up small payments over many years in favor of a larger cash injection at once.

A private investment fund affiliated with Quantum Strategic Partners Ltd provided the equity investment in a 230 megawatt portfolio of residential, commercial and industrial solar projects, the company said.

The fund was advised by Soros Fund Management LLC.

This is the second such transaction by the debt-laden solar company this year. The company in May received a $227 million investment from John Hancock in a diversified portfolio of residential, commercial and industrial solar power projects.

SolarCity said in a statement that its cost of capital for the deal was 7.4 percent, “a significant improvement over its first cash equity transaction.”

Monday’s deal included an 18-year-loan syndicated to five institutional investors, SolarCity said.

Bank of America Merrill Lynch acted as the sole syndication and structuring agent for the transaction.

The solar company said last month it faced greater-than-usual delays in closing new project financing commitments due to its takeover talks with Tesla.

Up to Friday’s close of $16.77, SolarCity’s shares had lost more than a fifth of its value since Tesla made its first offer in June.

Reporting by Arathy S Nair and Narottam Medhora in Bengaluru; Editing by Sriraj Kalluvila and Cynthia Osterman