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SolarCity Debt: A Problem Tesla Doesn't Need Right Now

Accepted submission by takyon at 2018-04-06 14:40:22
Business

Elon Musk's Tesla, Inc. [wikipedia.org] has been [nytimes.com] having [cnbc.com] some [soylentnews.org] problems [businessinsider.com] recently [soylentnews.org]. But one easy-to-overlook problem [bloomberg.com] is the debt incurred by its SolarCity [wikipedia.org] subsidiary:

But 16 months after Chief Executive Officer Elon Musk kicked up controversy by acquiring the solar-panel installer founded by two of his cousins, its obligations are a strain on Tesla's finances. The $2 billion [bloomberg.com] purchase came with a $2.9 billion debt load, and a chunk of that is soon coming due. That's bad timing for a company churning through about $6,500 a minute [bloomberg.com] and trying to stave off the need for another capital raise [bloomberg.com]. "SolarCity debt may not be the immediate cause of Tesla's problems, but it certainly isn't helping right now," said Alexander Diaz-Matos, an analyst at credit research firm Covenant Review LLC.

[...] Tesla's debt runs the gamut -- convertible bonds, promissory notes, term loans, cash-equity debt, asset-backed securities. Most of the total is tied to Tesla the automaker. But the energy unit, which includes the solar business, accounts for 27 of the 29 maturities set to come due through 2019.

[...] In recent months, Tesla's solar business lost [bloomberg.com] the residential-solar throne to rival Sunrun Inc., a San Francisco-based installer with a market capitalization about half the SolarCity purchase price. Tesla ceded market share as it attempted to boost energy-unit profitability and scrapped SolarCity's costly door-to-door [bloomberg.com] retail sales strategy. That was a smart move, according to Ross Gerber, co-founder of Gerber Kawasaki Wealth & Investment Management, which oversees more than $10 million in Tesla shares and options. He criticized the SolarCity deal but is still bullish on the company and Musk. "SolarCity was probably going to go bankrupt," Gerber said.

[...] For his part, Musk hasn't wavered from his commitment to turn Tesla into a one-stop shop [bloomberg.com] selling solar panels to capture power, devices to store the energy and cars that can be charged in the garage. The company started producing photovoltaic glass tiles in December at a factory in Buffalo, New York, and has begun selling solar at some of its own stores [bloomberg.com] and through [bloomberg.com] retailer Home Depot Inc.

At least Tesla production is higher than ever [businessinsider.com].


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