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Tesla Company Has Halted The Selling of Bonds Backed by Vehicle Leases Due to The Market Instability!
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- It’s the third asset-backed bond offer to be canceled in the last week.
- Investors had already purchased a portion of the deal.
According to sources familiar with the situation, Tesla Inc. has postponed a more than $1 billion offering of bonds backed by leases on its electric vehicles, making it the third issuer in the last week to postpone a sale due to market instability.
According to the person, who requested not to be identified because the sale is confidential, bankers for the automaker had already placed a major chunk of the bonds with fund managers when marketing was suspended.
Inflationary pressures and concerns about the economic consequences of Russia’s war in Ukraine have pushed short-term interest rate benchmarks higher in recent weeks. As a result, issuers are deferring their financing plans until the markets have stabilized.
On Friday, World Omni, an auto finance business, postponed an auto lease-backed bond offering that it had already begun promoting. Affirm, a “buy now, pay later” lender, also postponed an offering of debt backed by consumer installment loans on the same day.
Since the Russian invasion, at least seven securitized loan arrangements have been put on hold. Two commercial mortgage bonds and a residential mortgage bond were postponed last month due to market weakness worsened by the Federal Reserve’s drive toward monetary tightening to combat inflation.
On Wednesday, the central bank issued its first rate hike since 2018.
The Tesla ABS offering, known as Tesla 2022-A, began on March 7, and pricing advice was released three days later. According to two investors familiar with the sale, the majority of the tranches had gone “subject” by Tuesday, indicating that they had been sold and pricing was near. Tesla, on the other hand, went mute on the transaction before shelving it.
Tesla’s ABS program began in early 2018 and has now issued seven deals. According to presale assessments from rating agencies, the 2022-A collateral pool includes solid, prime-quality borrowers with an average FICO score of 774. Despite Tesla’s little expertise in originating, underwriting, and servicing vehicle leases, particularly through a complete economic cycle, Fitch Rating analysts stated in a study that the company’s managed portfolio and securitizations had performed well, with modest credit losses.