Tesla Plans to Use Stock-Cash Mix to Pay Off March Debt

(Bloomberg) -- Tesla Inc. has notified holders of bonds due in March that if they elect to convert the debt, they'll be paid with a 50-50 mix of cash and stock, according to a copy of the settlement notice seen by Bloomberg News.

The notice, dated Nov. 30, relates to the $920 million convertible bond due at the beginning of March. The equity-conversion price is $359.88 per share, a level Tesla's stock closed above on Thursday for the first time since Aug. 8.

The decision to use both cash and equity to pay off the debt may be a show of confidence by the Elon Musk-led company that it's going to be sustainably profitable going forward. The electric-car maker reported $881 million in positive free cash flow for the third quarter, a major turnabout following the costly and tumultuous period in which it was starting Model 3 sedan production.

"This would be a clear sign that, if there was a meaningful amount paid in cash, then they feel they can consistently produce cash flow and profit," Bloomberg Intelligence Joel Levington said in an interview. "Maybe there's some credence to what consensus is throwing out and what they said on the last earnings call."

Tesla didn't immediately respond to a request for comment.

Tesla posted its largest ever profit in the third quarter and appears to have put much of the drama of the Model 3 production ramp behind it. In the three months ended Sept. 30, the company reported having about $3 billion in cash, more than sufficient to cover the planned $460 million to settle half of the bond principal.

The electric-car maker is expected to generate $360 million in free cash flow in the fourth quarter and about $110 million in the first three months of 2019, according to analysts' estimates compiled by Bloomberg.

Profitability is an achievable feat for the company going forward, Musk said on an Oct. 24 earnings call, though cautioning that the first quarter of 2019 could be an exception due to the large bond maturity.

"The current operating plan is to pay off our debts and not to refinance them, but to pay them off and reduce the debt load and overall leverage of the company," Musk said on the call.

To contact the reporters on this story: Molly Smith in New York at msmith604@bloomberg.net;Dana Hull in San Francisco at dhull12@bloomberg.net

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net;Nikolaj Gammeltoft at ngammeltoft@bloomberg.net;David Papadopoulos at papadopoulos@bloomberg.net

For more articles like this, please visit us at bloomberg.com

©2018 Bloomberg L.P.


More Related News

Mnuchin Says It
Mnuchin Says It's 'Unlawful' to Give Democrats Trump's Tax Returns

"If I had turned them over, I would have been violating the law," Mnuchin told the House Financial Services Committee on Wednesday. The chairman of the House Ways and Means Committee, Richard Neal, has demanded six years of Trump's personal and business returns under a law allowing him to make such

IRS Memo Says President
IRS Memo Says President's Tax Returns Must Be Given to Congress

The memo said that the only way out of complying with the request from House Ways and Means Chairman Richard Neal is for the president to take the rare step of executive privilege. The Internal Revenue Service also said the memo was never forwarded to Treasury. A Treasury spokesman said that no one

Trump Files Notice of Appeal to Ruling on His Financial Records
Trump Files Notice of Appeal to Ruling on His Financial Records

On Monday, U.S. District Judge Amit Mehta ruled that the House Oversight and Reform Committee has authority to examine Trump's personal and business records going back to 2011. The Mazars case is Trump v. Committee on Oversight and Reform, 19-cv-1136, U.S. District Court, District of Columbia (Washington).

Billionaire's Pledge to Erase Students' Debt Sows Joy, Confusion

Billionaire Robert F. Smith stunned students at Morehouse College when he vowed to pay off the student loans of every member of the class of 2019. On behalf of the eight generations of my family that have been in this country, we're gonna put a little fuel in your bus," Smith, 56, founder of Vista Equity Partners, said Sunday during his commencement speech to the Atlanta college's graduating class. My family is going to create a grant to eliminate your student loans," Smith added, according to a Twitter post by Morehouse.

Tesla Falls as Analyst Says Company Facing
Tesla Falls as Analyst Says Company Facing 'Code-Red Situation'

In a note Sunday, Wedbush analyst Dan Ives described the electric-car maker's predicament as a "code red situation" and cut his price target on the stock to $230 from $275. Ives slashed his target from $365 just last month. Tesla shares fell as much as 7.5% to $195.25 and were trading at $200.68 as

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


Top News: Economy

Hit "Like"
Don't miss any important news
Thanks, you don't need to show me this anymore.