Tesla offers $750 million five-year convertible notes at 1.875%-2.375% yield, up 25%-30%

By Stephanie N. Rotondo

Seattle, March 15 – Tesla Inc. is selling $750 million of convertible senior notes due 2022, the company said in a prospectus filed with the Securities and Exchange Commission on Wednesday.

Initial price talk is for a 1.875% to 2.375% yield and an initial conversion premium of 25% to 30%, according to a market source.

Goldman Sachs & Co., Deutsche Bank Securities Inc., Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC are the lead bookrunners. Barclays, BofA Merrill Lynch and Credit Suisse Securities (USA) LLC are also participating.

The deal includes a $112.5 million over-allotment option.

Holders can convert the issue in certain circumstances prior to Dec. 15, 2021. After that date, the bonds are convertible at any time.

Conversions will be settled in cash, common stock or a combination, at the company’s option.

The convertibles are putable upon a change of control.

The issue is non-callable for life.

In connection with the offering, Tesla is selling $250 million of common stock. The equity offering will include a 15% greenshoe.

Elon Musk, Tesla’s chief executive officer, plans to purchase $25 million of the stock.

Proceeds from both offerings will be used to strengthen the company’s balance sheet, to further reduce any risks associated with the rapid scaling of the business due to the launch of the Model 3 and for general corporate purposes.

Tesla is a Palo Alto, Calif.-based car manufacturer.

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