&w=1024&resize=1024,0&ssl=1 "Tesla Sells 3 Million in Debt Guaranteed by Prime Auto Lease to Investors | world news")
Tesla Inc. Sold more than $783 million in prime borrower leases to investors in its second asset-backed securities deal of the year.
The electric car maker last week launched the initial marketing phase of a loan sale led by Societe Generale SA. The sale ended on Wednesday with the highest-rated slice of the securitization carrying a coupon of 4.827 percent.
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By comparison, the top portion of a $1.72 billion prime auto loan ABS deal for Hyundai Motor Co. paid a 4.75 percent coupon on Tuesday and an auto loan transaction $1.29 billion top-line coupon for General Motors Co. The highest coupon on Tesla's $750 million deal in March was 5.53%.
The sale of the electric car maker is the latest in a series of deals backed by auto sector assets, as issuers rush to do deals ahead of disruptions in credit markets stemming from the U.S. election. So far in October, automakers have used the $13.6 billion securitization route as they look to sell their debt or leases to institutional investors.
Tesla's offering has hit the market ahead of CEO Elon Musk's planned launch of a long-awaited robotaxi on Thursday, as the company battles a slowdown in EV sales.
Tesla's ABS issuance reached a record of nearly $4 billion last year, with the pipeline slowing until 2024, with transactions totaling $1.5 billion so far. Since beginning its securitization program in 2018, the electric vehicle company has entered the market at least 10 times, but not as frequently as many of its competitors. Ford Motor Co. and GM each sold $13 billion in asset-backed debt this year.
Buyers of these loans are at risk of loss due to the decrease in a vehicle's resale value, which can occur after major depreciation. A vehicle's lower residual value can force lessors to charge customers more, making leasing less attractive.
Tesla vehicles have faced their own particular challenges, as the value of used electric cars has been hurt by falling sticker prices for new EVs. According to research from iSeeCars, the company's 25% price cut on the Model 3 is the biggest reduction among EVs so far this year. Rents as a percentage of Tesla sales are also declining, a trend analysts have linked to weak resale values.
“Tesla’s price cuts, primarily affecting Models S and X, along with the easing of EV standards, could result in lower RV revenues,” according to a presale report from Fitch Ratings, which rated the higher level F1 + sf, indicating greater repayment potential. “The magnitude of the impact is mitigated by structural protection and Fitch's conservative loss estimates.”
Tesla's latest deal comes from its active leasing platform and consists of more than 26,000 leases with a weighted average FICO credit score of 764, according to deal documents.
Tesla and Societe Generale did not immediately respond to requests for comment.
Problems in the ABS market are growing. More than US$292 billion in deals have come to market so far in 2024, already surpassing last year's total. The next milestone is set at $313 billion in 2021, according to data compiled by Bloomberg.
