After market close today, Tesla announced that it closed two deals last week with Deutsche Bank to increase two credit lines by $200 million and $300 million respectively – for a total of $500 million more in available financing. The deals come as Tesla is expected to increase its capital expenditure to prepare for production expansions at its vehicle factory in Fremont and battery factory in Nevada ahead of the Model 3 introduction next year.
The first deal was between Tesla, its Netherlands-based subsidiary ‘Tesla B.V’, and Deutsche Bank. The company wrote in a SEC filing:
On December 15, 2016, Tesla Motors, Inc. (the “ Company ”) and its subsidiary Tesla Motors Netherlands B.V. (“Tesla B.V.” and together with the Company, collectively, the “Borrowers”), entered into the Fifth Amendment (the “Credit Agreement Amendment”) to the ABL Credit Agreement, dated as of June 10, 2015 (as amended, modified or supplemented, the “Credit Agreement”), among the Borrowers, the lenders party thereto, and Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and the other agents party thereto. The Credit Agreement Amendment increased the revolving commitments under the Credit Agreement by $200.0 million, thereby increasing the total revolving commitments from $1.0 billion to $1.2 billion, and amended the Credit Agreement to permit the Borrowers to obtain up to $50.0 million of additional commitments pursuant to the terms of the Credit Agreement.
That’s $200 million with potentially $50 million more that Tesla can borrow toward its operations and expenditures.
The second deal was between ‘Tesla Finance’, Tesla’s financial unit under which the automaker operates its leasing program, and Deutsche Bank again:
On December 15, 2016, Tesla Finance LLC (“ TFL ”) and Tesla 2014 Warehouse SPV LLC (the “Borrower”), each a wholly-owned direct or indirect subsidiary of the Company, entered into Amendment No. 2 (the “Warehouse Agreement Amendment”) to the Loan and Security Agreement, dated as of August 31, 2016 (as amended, modified or supplemented, the “Warehouse Agreement”), among TFL, the Borrower, the lenders and group agents party thereto, and Deutsche Bank AG, New York Branch, as administrative agent (the “Warehouse Administrative Agent”). Among other things, the Warehouse Agreement Amendment increased the maximum facility limit under the Warehouse Agreement by $300.0 million, thereby increasing the total facility limit from $300.0 million to $600.0 million, and modified certain terms to facilitate the joinder of certain types of additional lenders, including those in the Citi Lending Group (as defined below).
Tesla has updated its language about financing over the past few months to say that they won’t “need” to raise money until the “first half of 2017,” but they also always kept the door open in case it made sense.
At the end of last quarter, Tesla had just over $3 billion in cash, but the company’s capital expenditures are also expected to increase significantly in the next few months to prepare for the launch of the Model 3 and will be accompanied by a more aggressive than usual production ramp up to satisfy the more than 400,000 people who placed a reservation for the vehicle, which is expected in the second half of 2017.