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CTOnews.com, Sept. 17 (Xinhua) Tesla is looking for investors to raise money through a $1.8 billion securitization of his electric car rental service (currently about 13.104 billion yuan), in Tesla's largest deal to date, according to a new report.

According to Tuyuan Pexels, according to marketing materials and Fitch ratings seen by MarketWatch, Tesla on Thursday began calling on potential investors to participate in its $1.8 billion vehicle rental securitization, a move that could generate about $1 billion in cash and more capital if banks are willing to increase the size of the bond category.

So, what exactly is lease securitization?

Leased asset securitization refers to the process of issuing securities in the capital market and improving the liquidity of leased assets supported by the cash flow (that is, rental income) generated by leased assets.

The securitisation process essentially means that Tesla will package 1.8 billion dollars worth of car business leases together and then sell them to investors in the form of bonds, which can be seen as an expected cash inflow from leases. without having to let customers pay for the car bit by bit. Eventually, securitized leases will provide Tesla with another source of financing in addition to the corporate bond market.

According to marketing materials, Tesla expects the program to attract about $1 billion (CTOnews.com Note: about 7.28 billion yuan) in bond investment, which will be divided into five grades from AAA to AABB. Higher-rated bonds will go to the market, while lower-rated bonds will not.

In fact, Tesla CEO Elon Musk has warned the Fed of the consequences of raising interest rates many times in the past. However, Tesla can also take advantage of the interest rate hike to provide shorter leases for consumers through lease securitisation.

According to public information, Tesla has also initiated lease securitization in the past.

Tesla paid 5.6-6.4 per cent coupons to investors in a similar bond deal in July, compared with 0.16-1 per cent in a deal in 2021, when Fed interest rates were close to zero, according to Finsight. This suggests that borrowing costs have risen sharply as the Fed continues to raise interest rates.

Today, the average weighted interest rate for major borrowers in the securitisation process is 5.06%, up from 4.9% earlier this year.

If demand for new bonds is high, banks can choose to expand the size of the bond category, according to one investor. This will provide greater financing for Tesla. However, the deal is not expected to be priced until next week. Tesla didn't respond to a request for comment.

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