December 29, 2016 - By Ruchi Gupta · 0 Comments
Tesla Motors Inc (NASDAQ:TSLA) has increased its borrowing capacity by around $500 million. This has been made possible by amending the agreements it has with its lenders. The move comes in the midst of an expansion spree that will see the company ramp up production as it integrates a solar-energy firm it acquired under its umbrella. This was disclosed in a regulatory filing.
Tesla’s total borrowing from Deutsche Bank AG (USA) (NYSE:DB) now comes to $1.2 billion. Should the need to borrow more arise, Tesla will also have access to an extra $50 million. The disclosure from the regulatory filing now brings the total of Tesla’s credit lines to around $1.8 billion.
Though Elon Musk, Tesla’s chief executive officer, had earlier indicated that increasing debt would not be necessary before the year-end, the credit line extension signals a shift in strategy. At the time Musk’s remarks were surprising to some analysts as they had been projecting that Tesla needed at least $2.5 billion in order to achieve its ambitions. Analysts, however, did not see anything unusual in the comedown move.
“I don’t think it’s that shocking that over time Tesla needs more funding. It’s young and has enormous growth plans, so over time I would expect more equity raises and more revolver capacity,” a Morningstar Inc analyst, David Whiston, told Bloomberg.
The electric automaker has ambitious plans to increase production by 2018 tenfold compared to 2015 figures. This will see the company roll out of the assembly line about 500,000 vehicles per year. Model 3 will constitute a big percentage of these vehicles as it will be the first electric car by Tesla that will be aimed at the mass market. The mass market electric car is expected to be launched by the end of 2017.
Other capital-intensive projects that Tesla is undertaking include constructing a gigantic battery-manufacturing plant in Reno, Nevada. Tesla reported its first quarterly profit in eight quarters two months ago.
In Wednesday’s pre-market trading, Tesla Motors Inc was up 0.51% in the morning hours from the previous day’s close of $219.53 a share.
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By Ruchi Gupta