Meeting Model 3 Demand: Tesla Wants to Raise $1.5 Billion Through Junk Bonds

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Tesla intends to raise upward of $1.5 billion in order to ramp up production of its forthcoming lower-market Model 3 sedan, the company announced this week.

In order to fund mass production of the electric car—preorders for which are piling up—Tesla is for the first time looking at junk bonds.

Shares of Tesla are up two-thirds this year, putting the company’s value at $60 billion. But it’s not profitable, which is usually a no-no for bond investors. Tesla last raised money (to the tune of $1.4 billion) in March through a convertible debt offering.

Standard & Poor’s did not alter its negative outlook for Tesla following the news. The financial analysis firm assigned a “B-” rating for Tesla’s bond issue, which is a junk rating. Moody’s also assigned a junk rating.

Tesla has a lot of debt these days, largely due to its multi-billion-dollar acquisition of Solar City last year. Indeed, even this junk bond effort will only fund the company’s needs through 2018, analysts believe. But Tesla also has some cash—around $3 billion right now—though noticeably less than it had at the start of the year.

Shares in the company tilted slightly downward following the announcement.

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