
Cash Squeeze at Tesla, SolarCity - endswapper
http://www.wsj.com/articles/elon-musk-faces-cash-squeeze-at-tesla-solarcity-1472687133
======
chollida1
Tesla has a great credit facility backed by Goldman and Deutsche bank.

Unfortunately, those lenders just made Telsa amend their ABL (Asset backed
loan) such that when the Solar City deal goes through Solar City will need to
be firewalled off from Tesla for purposes of borrowing money.

Essentially the lenders have made Tesla agree that Solar city would not be a
subsidiary of Telsa for purposes of borrowing on their ABL.

I've never seen this type of provision before and I dont' think Telsa expected
it when they initiated the merger.

Solar City had to issue debt for an 18 month term at 6.5%. With today's
markets those are almost loan shark terms. I think its telling that with so
much cash sloshing around, Musk had to step in and buy so much of the issue.

With Tesla's credit rated in junk bond territory and both Solar City and Tesla
needing large chunks of cash in the next year, it looks like Telsa is going to
have to tap the equity markets again.

Hopefully the markets continue to believe in Musk. If not I'd expect Musk to
be talking to Washington about a government backed loan.

Couple this cash crunch for two of his companies along with the Space X rocket
explosion today, I can't imagine the amount of stress Musk is under right
now!!

~~~
forgetsusername
> _Solar City had to issue debt for an 18 month term at 6.5%_

HackerNews tends to rip on the "bankers" for deceptive practices during the
mortgage crisis. Yet SolarCity is offering unsecured and untransferable bonds,
directly to the public, and on the front page is comparing the available
interest rates to savings accounts and GICs:

[https://solarbonds.solarcity.com/](https://solarbonds.solarcity.com/)

With the financial situation as you describe, there is _far_ more risk
involved in buying these bonds than a savings account, so the appeal to the
high rate of interest is not a fair comparison. I'm curious what people here
think about this practice.

~~~
hga
_untransferable bonds_

There's such a thing???

Sure enough, found with Google, and evidently they've been doing this for a
couple of years: [https://solarbonds.solarcity.com/customer-
agreement/](https://solarbonds.solarcity.com/customer-agreement/)

 _The Solar Bonds I purchase may not be listed or traded on any secondary
market or exchange, and even if they are, they may not be actively traded. As
a result, I should assume that I may have to hold the Solar Bonds until
maturity. Also, because I am purchasing the Solar Bonds directly rather than
through a broker or other financial intermediary, it may be more difficult for
me to sell my Solar Bonds, even if a trading market is or becomes available._

I suppose if you view them as you should any crowdfunded thing, don't expect
anything back, but you're hoping to help something you believe in, that's OK,
but....

~~~
Tloewald
This is beginning to sound like a greener version of Enron.

~~~
CCND0110
Green that will be entirely in the red within 6-8 quarters.

~~~
JonFish85
It's already very in the red, and will continue to be for the foreseeable
future.

------
retbull
Ouch. I hope that things pull through. He is taking so much risk on with the
SpaceX program, Solar City, and Tesla. I feel like it is a crazy risky bet
which will either pay off very well or leave him totally broke.

~~~
antoniuschan99
Ever since hearing about him, I've worried he may end up like this guy :$

[https://en.wikipedia.org/wiki/William_C._Durant](https://en.wikipedia.org/wiki/William_C._Durant)

~~~
jandrese
Wow, there have to be some investment banker of the year awards for whomever
convinced him and Rockefeller to bail them out after it was blatantly obvious
the entire market was on fire.

It's telling that when it happened again in 2007 the problem had grown so big
that not even sucker billionaires could help, they had to be bailed out by the
federal government. This time the sucker was the American people.

------
computerlab
Fun fact: Musk has said that he came up with the idea for SolarCity at burning
man.

[https://en.m.wikipedia.org/wiki/Elon_Musk#cite_note-KQED-
Sol...](https://en.m.wikipedia.org/wiki/Elon_Musk#cite_note-KQED-
SolarCity-102)

------
seesomesense
Good short potential on Musk's bonds.

------
devy
This is a crazy idea, but why cash cow Apple lend some money to Elon & Co.? It
should be a win-win situation (Apple takes a share of Tesla and perhaps
tapping into Tesla's core EV tech/batteries production capability) and Tesla
get to alleviate the cash situation.

Ultimately, Tesla and Apple must join forces in order to advance / accelerate
the sustainable transportation.

~~~
spyspy
If Apple really wanted Tesla's assets they should wait until the 11th hour and
swoop in with a rescue package, or let them slip into bankruptcy and buy up
the assets individually.

~~~
devy
Perhaps that's too late?

------
ilaksh
The Tesla Power Wall is designed to store electricity generated by Solar
City's solar panels.

The Tesla Power Wall and the Tesla battery pack for the car are very similar
except one is larger and goes on the car and the other is smaller and goes on
the wall.

Solar power is not useful without having a way to store it.

It is amazing how difficult it is for people to see the connection between
these systems and that these are complementary products that are part of the
same vision.

------
Cshelton
Wall Street doesn't like long term Capital Expenditures. They can only see to
the next quarter.

For proof, go look at railroad companies. Same thing. Everyone knows the
railroads will have periods of very high CapEx, yet they still only care about
the current quarter.

These articles are common for any company doing massive infrastructure
projects. Raising capital is a business decision. Sure, he could wait a few
years until he has the money to build the infrastructure (megafactory) he
needs, but that's not how you grow a company at the speed it needs to.

Also, I didn't read the article, I refuse to visit WSJ.

~~~
Tloewald
Refusing to hear out opinions you expect to disagree with isn't healthy. I
don't care for the WSJ's biases either, but I'm going to at least look at
their arguments.

~~~
barney54
Which biases are you talking about? The right-wing bias of the editorial pages
or the left-wing bias for the news part of the paper? According to this study,
the WSJ's news section is more left-wing than the NYT and other newspapers.
See p. 24.
[http://web.archive.org/web/20061128014117/http://www.polisci...](http://web.archive.org/web/20061128014117/http://www.polisci.ucla.edu/faculty/groseclose/Media.Bias.pdf)

