Tesla’s US$1.8b of junk bonds fall

This article first appeared in The Edge Financial Daily, on September 7, 2018.
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NEW YORK: Tesla Inc’s US$1.8 billion (RM7.47) of junk bonds fell to their lowest price since they were issued last year after Mercedes-Benz unveiled a new electric car and Goldman Sachs Group Inc said the company might struggle to meet Elon Musk’s goal of being cash-flow positive.

“The advantage Tesla had as first to market is starting to go away,” said John McClain, a high-yield portfolio manager at Diamond Hill Capital Management, which oversees US$22.5 billion.
“It’s going to be a much more competitive marketplace in the coming years, and you combine that with Musk with his own personal issues,” he said.

 Tesla’s 5.3% bonds dropped 1.2 US cents to 85.7 US cents on the US dollar at 2.40pm in New York, according to Trace bond price data. That gives the notes, which are senior unsecured and due in 2025, an effective yield of more than 8%.

Tesla’s stock extended declines on Wednesday afternoon, dropping 3.2% to US$279.71, its lowest price since late May. — Bloomberg