- Wall Street bond investors are demanding record amounts to hold Tesla debt after the company slipped back into the red on Wednesday.
- Spreads on Tesla bonds hit 618 basis points, compared to an industry average of 373 for similar high-yield notes.
- Tesla’s bonds are rated six notches below investment grade, landing them squarely in the "junk" category.
Investors are demanding a record risk premium for holding Tesla’s $1.8 billion junk bond after the electric car maker posted a $700 million first-quarter loss and signaled it may be in the market for more capital soon.
The price on Tesla’s 5.3% note due August 2025 slipped, nudging its yield to the highest in about six months at 8.51% in European trading.
Its spread, the measure of the premium in yield investors demand for the added risk of holding a bond from Tesla – rated six notches below investment grade by Standard & Poor’s and Moody’s – rather than a safer U.S. Treasury security, widened by 3 basis points to a record 618 basis points.
By comparison, the spread on an average high-yield bond is 373 basis points, according to ICE BAML Index data, and for comparably rated "B-" issuers it is 402 basis points.
(Reporting By Dan Burns)
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Source: Business Insider –