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Tesla, Inc. Downgraded

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On March 27, 2018, Moody’s Investors Service downgraded Tesla, Inc.’s corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD and its unsecured notes rating to Caa1 from B3. According to Moody’s, Tesla’s ratings reflect the significant shortfall in the production rate of the Company’s Model 3 electric vehicle. The Company also faces liquidity pressures due to its large negative free cash flow and the pending maturities of its convertible bonds. Moody’s further states that the negative outlook reflects the likelihood that Tesla will have to undertake a large, near-term capital raise in order to refund maturing obligations and avoid a liquidity short-fall. Prospects for addressing its liquidity requirements (whether equity, convertible notes or debt) will be supported if the Company can establish credibility for reaching Model 3 production levels — 2,500 per week by the end of March, and 5,000 per week by the end of June. Read more on distressed companies.

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