Tesla said it intends to raise about $1.5 billion in a bond offering as the U.S. automaker seeks to ramp up production of its newest electric sedan, the Model 3.
The debt offering marks Tesla's debut in the junk-bond market and the company will start roadshows on Monday, IFR reported, citing lead bankers on the deal.
Tesla is counting on the Model 3, its least pricey car, to become a profitable, mass market manufacturer of electric cars.
Pre-orders for the Model 3, which has a $35,000 base price, have surpassed half a million, averaging about 1,800 per day since its launch late last month.
Following the announcement, Standard & Poor's reaffirmed its negative outlook for the automaker and assigned a "B-" rating for the bond issue -- deep into junk credit territory. S&P also maintained its "B-" long-term corporate credit rating on Tesla.
"The affirmation reflects Tesla's improved liquidity cushion, which in our view somewhat offsets the substantial risk related to the rapid scale-up of its Model 3 production and the significantly high debt burden on its balance sheet," S&P said in a statement on the bonds. "Given the recent launch of the Model 3, scale of Tesla's battery manufacturing investments, the public perception of its technology, and its access to the capital markets, the company's financial commitments appear sustainable for now - albeit with significant execution risks."
Moody's assigned a junk "B3" rating to the bond issue and said the company's rating outlook was stable.
The rating agency said the overall company's "B2" rating was supported by the fact that if Tesla ends up in serious financial trouble, its brand name, products and physical assets would be of "considerable value" to other automakers.
"The major challenge facing the company during the next twelve months will largely be the considerable execution risks associated with the rapid ramp-up in production of a totally new vehicle," Mood's senior vice president Bruce Clark said in a statement.
Tesla shares fell 0.5 percent to close at $355.17.