Tesla has halted the offering of more than $1 billion in vehicle lease-backed bonds on its cars as market conditions continue a trend of unpredictability, according to a report by Bloomberg noted.
Citing people with knowledge of the matter, the report said Tesla’s bankers had placed a “significant portion” of the bonds with fund managers before the market halt. Inflation, which CEO Elon Musk said would drive up vehicle prices, along with the uncertainty of Russia’s war with Ukraine, has pushed up short-term interest rates in recent weeks. . Some issuers are suspending their financing plans until market conditions have stabilized.
Tesla is the third issuer to halt a selloff amid the unpredictable nature of the market in the past week. World Omni, an auto finance company, postponed offerings of the auto lease-backed bond on Friday, although it has already started marketing it. Affirm Holdings Inc. also delayed a debt-backed consumer installment loan offering on the same day.
Bloomberg Tesla said neither the banks involved in arranging the deal, namely Wells Fargo, Credit Suisse, Barclays and Citigroup, declined to comment.
The report says at least seven securitized debt transactions have been halted since Russia began its invasion of Ukraine. Market conditions have not been ideal for several months and the surge in inflation is affecting almost all sectors. Tesla announced price increases across its fleet earlier this week, with its lowest-priced vehicle now starting at nearly $47,000.
Tesla Hikes Prices Across Its Vehicle Lineup, Model X Plaid Sees $12.5,000 Increase
The Tesla ABS offering is known as TESLA 2022-A, according to the report. It launched on March 7, with price indications released on March 10. Most of the slices have been sold and pricing was imminent on Tuesday, the company said. The deal was incomplete as the communication died down before Tesla finally shut it down.
Tesla has issued seven deals since its ABS program began in early 2018. This year’s collateral pool consists of borrowers with an average FICO score of 774, according to pre-sale reports retrieved by Bloomberg.
According to Fitch Rating analysts, Tesla’s managed portfolio and securitizations have performed well despite the company’s limited experience in originating, underwriting and managing auto leases.
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