8-KMaterial AgreementsFinancial Events

Tesla, Inc. 8-K Report, Material Agreement (Sep 7, 2016)

Filed September 7, 2016For Securities:TSLA

Summary

This 8-K filing by Tesla, Inc. (TSLA), filed on September 6, 2016, reports on a new financing arrangement designed to support Tesla's direct vehicle leasing program. Through its subsidiary, Tesla Finance LLC, the company has entered into a Loan and Security Agreement with Deutsche Bank AG, establishing a warehouse facility that allows borrowing up to $300.0 million. This facility is secured by a pool of lease contracts and the associated leased vehicles. The primary benefit for investors is the potential reduction in the need for Tesla to raise capital from public markets. By securing this debt financing, Tesla can significantly decrease its cash requirements for the leasing program, which in turn should lessen the likelihood of equity dilution for existing shareholders. The facility has a draw period ending August 31, 2017, with full repayment due by September 20, 2018, subject to standard terms and covenants.

Key Highlights

  • 1Tesla Finance LLC (TFL) secured a new $300.0 million warehouse financing facility with Deutsche Bank AG.
  • 2The facility is intended to support Tesla's direct vehicle leasing program.
  • 3Borrowings under the agreement are secured by a pool of lease contracts and related leased vehicles.
  • 4The draw period for the facility extends until August 31, 2017, with repayment due by September 20, 2018.
  • 5Tesla itself is not a guarantor of the agreement, mitigating direct corporate risk.
  • 6This financing is expected to reduce Tesla's cash requirements for its leasing operations.
  • 7The reduced cash needs from this facility could lead to less need for public capital raises, potentially reducing dilution for existing shareholders.

Frequently Asked Questions

The agreement establishes a $300 million financing facility through Tesla Finance LLC (TFL) and a subsidiary borrower, secured by vehicle leases and vehicles. Its primary purpose is to fund Tesla's direct vehicle leasing program, reducing the need for Tesla to use its own cash or raise capital from public markets for this activity.

This facility significantly reduces Tesla's cash requirements for its direct leasing program. Consequently, it lessens the company's reliance on public markets for fundraising, which in turn is expected to reduce the potential for future dilution to existing Tesla shareholders.

The borrowings under the agreement are secured by a pool of Tesla's direct vehicle lease contracts and the related leased vehicles allocated to those contracts.

The ability to borrow under the agreement ends on August 31, 2017, and the full outstanding amount is due on September 20, 2018, subject to standard acceleration clauses.