Moody's downgrades Tesla credit rating on Model 3 production delays

The price on Tesla's eight-year junk bond, which matures in 2025, fell to its lowest since it was issued in August. It hit 90.8 cents late Tuesday afternoon just ahead of the Moody's announcement, according to IHS Markit. The yield, which moves inversely to price, rose to 6.91 percent, the data showed.

Tesla raised a more-than-expected $1.8 billion in August for that junk bond offering to fund accelerated production for its Model 3 sedan, despite poor appetite at the time for risky assets.

Traders have been betting heavily against the electric car maker's bonds amid growing worries about the electric car maker's ability to deliver on its production goals. Ninety-nine percent of lendable supply for shorting Tesla's high-yield bond has been used, Sam Pierson, director, securities finance, at IHS Markit said in a Monday note.

Tesla had $3.4 billion in cash and securities at the end of last year, and $1.9 billion through its asset-based lending facility, the Moody's release said. "This liquidity position is not adequate to cover:

1) the approximately $500 million in minimum cash that we estimate Tesla must maintain for normal operations;

2) a 2018 operating cash burn that will approximate $2 billion if Tesla maintains high discretionary capital expenditures to increase capacity; and

3) convertible debt maturities of approximately $1.2 billion through early 2019. These cash needs will likely require Tesla to undertake a near-term capital raise exceeding $2 billion."

"These cash needs will likely require Tesla to undertake a near-term capital raise exceeding $2 billion," Moody's said in the release.

https://www.cnbc.com/2018/03/27/moodys-downgrades-tesla-credit-rating-on-model-3-production-delays.html