After market close today, Tesla announced that it increased its asset-backed line by $625 million with an option to obtain up to $175 million of additional incremental commitments.
The move comes as Tesla’s cash needs are increasing ahead of the several expansions needed to launch Model 3 production and support its growing fleet.
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Deutsche Bank is the administrative agent of the credit agreement, which is now worth $1.825 billion to $2.0 billion depending on the option.
Tesla wrote in a SEC filing today:
“On June 19, 2017, Tesla, 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 Sixth 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 $625 million, thereby increasing the total revolving commitments from $1.2 billion to $1.825 billion, and also amended the Credit Agreement to permit the Borrowers to obtain up to $175 million of additional incremental commitments for potential total revolving commitments of up to $2.0 billion, subject to the terms and conditions of the Credit Agreement.”
We reached out to Tesla for a reason behind the increase and we will update if we get an answer.
At the end of last quarter, Tesla had a record amount of cash on hand, $4 billion, but the company also warned that its capital expenditure would spike by the time it would hit Model 3 production.
They wrote in the shareholder’s letter in May:
“We expect that year-to-date capital expenditures will be slightly over $2 billion by the time we start Model 3 production. We expect additional investments through the remainder of the year as we increase automation and add production capacity”
Production is expected to start in July and Tesla reported capital expenditures of $553 million during the first three months of the year – meaning that capex could be around $1.5 billion from April to July alone.
In preparation for the large investments, Tesla raised over $1.2 billion through new stocks and convertible notes earlier this year – on top of now adding to their asset-backed line.