Tesla to shell out cash for big $920M bond payment

By TeslaFOXBusiness

Tesla is trying to offset bad news with announcement: Gordon Johnson

Vertical Group managing director Gordon Johnson and former Wall Street Journal reporter Zachary Karabell on how Tesla updated its website to say “great things are launching at 2PM Pacific” and whether investors should be bullish on the company.

Friday marks the deadline for electric automaker Tesla to deliver a $920 million bond payment, which will likely dent the company’s cash flow.

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The automaker would have been able to use equity to make some of the payment had the stock reached an average price of $359.87 for a 20-day trading period starting on Jan. 29 – which did not happen.

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The payment, which is the company’s largest to date, stands to wipe out nearly 25 percent of the company’s cash.

A spokesperson for Tesla declined to comment on Friday’s bond payment and instead referred back to comments delivered during the company’s most recent quarterly report, where it was noted the automaker had enough cash on hand to “comfortably” cover the payment.

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At the end of 2018, Tesla had about $3.7 billion in cash and equivalents. It began generating positive free cash flow at the end of last year and may need to continue to do so to pay off pending debts.

Tesla had around $11 billion in debt at the end of last year, as reported by The Associated Press. That figure includes $566 million worth of notes due in November and $1.1 billion due in June 2020. Additionally, $1.38 billion worth of notes come due in March 2021 and $978 million mature the following year.

Skeptics doubted Tesla would be able to make Friday’s payment without raising capital.

On Thursday evening the automaker announced further cost-cutting initiatives, including store closures and a gradual shift to online only sales.

It also unveiled a version of its flagship Model 3 sedan with a price tag of $35,000 – as Musk delivered on a long-awaited promise.

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Meanwhile, the entrepreneur has been running into more trouble with the Securities and Exchange Commission (SEC) regarding his social media posts. The SEC last week filed documents indicating Musk was in contempt of court after firing off a tweet they allege he did not receive pre-approval for – a condition of his previous settlement with the body. The Tesla CEO has until March 11 to respond.