Tesla recently sold $499 million in bonds backed by loans it provides to customers purchasing solar equipment, a step aimed at supporting its solar business.
Deutsche Bank started promoting the five-part bond offering on Monday, and the process concluded by Friday, reports Bloomberg. All tranches of this debt were rated investment grade by Fitch Ratings, who noted that the high credit scores of customers financing their solar purchases contributed to the favorable ratings.
Demand for these bonds was high, with more investor interest than there was available supply in each tranche, according to sources. The top tier of this debt will offer investors a 4.83% return.
This isn’t Tesla’s first venture into bonds backed by solar assets. Tesla acquired SolarCity in 2016, a move that initially led to bond sales in the solar sector. However, Tesla has mostly backed its asset-backed debt with vehicle leases since 2018.
Last year, Tesla made its first bond move supported by prime auto loans, expanding its range in the debt market.
So far in 2024, Tesla has issued $2 billion in asset-backed debt, lower than the nearly $4 billion from last year. This bond sale comes as more companies are tapping into debt markets, with total sales in asset-backed securities reaching $321 billion this year—the highest since the financial crisis. In solar financing alone, the market for debt backed by solar assets has grown to $5 billion in 2024, up from $3.7 billion in the same period last year, according to Bloomberg data.
However, delinquencies in solar loans have climbed to their highest level since the early pandemic, according to the Kroll Bond Rating Agency. Rising interest rates have made solar equipment less affordable, pushing some solar companies, like Lumio and SunPower Corp., into bankruptcy.