Tesla has stopped issuing more than $1 billion in bonds backed by its car leases as market conditions continue to be unpredictable, Bloomberg said in a report.
Citing people with knowledge of the matter, the report says that Tesla’s bankers placed a “significant portion” of the bonds with fund managers before the marketing was halted. Inflation, which CEO Elon Musk has hinted will drive car prices up, along with the uncertainty of Russia’s war on Ukraine, has sent short-term interest rates plummeting over the past few weeks. Some issuers are suspending funding plans until market conditions stabilize.
Tesla became the third issuer to suspend the sale of shares due to the unpredictability of the market last week. Auto finance company World Omni on Friday postponed the placement of bonds backed by car leasing, although it had already started selling them. On the same day, Affirm Holdings Inc. also postponed the placement of debt secured by consumer loans in installments.
Bloomberg reported that neither Tesla nor the banks involved in arranging the deal, including Wells Fargo, Credit Suisse, Barclays and Citigroup, declined to comment.
The report indicates that at least seven debt securitization deals have been halted since Russia began its invasion of Ukraine. Market conditions have not been ideal for several months, and soaring inflation has affected almost all sectors. Earlier this week, Tesla announced a price increase for its entire fleet, with the cheapest vehicle now costing nearly $47,000.
Tesla raises prices for the entire line of cars, Model X Plaid will rise in price by 12.5 thousand dollars
According to the report, the Tesla ABS proposal is known as TESLA 2022-A. It was launched on March 7th, with price guides released on March 10th. Most of the tranches were sold and prices were set by Tuesday, the company said. The deal was unfinished as the connection ended before Tesla eventually stopped it.
Tesla has completed seven transactions since the launch of the ABS program in early 2018. This year, the collateral pool consists of borrowers with an average FICO score of 774, according to presale reports obtained by Bloomberg.
Tesla’s managed portfolio and securitization performed well, according to Fitch Rating analysts, despite the company’s “limited experience” in handling, underwriting and car leasing services.
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Tesla stops selling vehicle lease-backed bonds as market remains unpredictable
