Tesla’s upsized $1.8-billion eight year non-call three junk bond was trading early on Monday around par or where it priced late on Friday.
The bond, which ended up with order books of just shy of $4 billion, was seeing a lot of investor interest in early trades, said a syndicate banker.
In its first foray into selling pure debt, Tesla priced the eight-year non-call three-year bond on Friday at a final yield of 5.3 percent, or about 5 basis points higher than launch levels.
The unusual move to change pricing levels from launch was a company decision to “sweeten the deal” for investors who supported the transaction, said a banking source.
Bankers attributed name recognition of founder Elon Musk and stellar performance of Tesla’s stock – up 67 percent this year – for the strong interest for the bonds.
The source said over $1 billion of the total bond offering was taken up by 10 accounts, while the rest went to a variety of accounts. Almost all these accounts had put in orders right at the start of bookbuild last week and stayed right through to pricing, he said, reflecting the popularity of the offering.
The bond is expected to be the first of several in coming years, as Tesla switches away from equity issuance to fund its ambitious growth plans – and perhaps acquisitions as well.
Tesla had issued four convertible bonds to date – the company currently has $3.3 billion outstanding – but it has never before accessed the public unsecured bond market.
Moody’s and S&P rated the bond B3 and B- respectively.
Goldman Sachs acted as left lead, while Morgan Stanley, Bank of America, Citigroup, Deutsche Bank and RBC came in as bookrunners.