Tesla Motors Inc. has entered into a Loan and Security Agreement with Deutsche Bank AG, to support the Tesla Finance direct vehicle leasing program, according to an 8-K filed with the Securities and Exchange Committee last week.
Under the agreement, Tesla may borrow up to $300 million, with the ability to draw scheduled to end on Aug. 31, 2017.
Tesla anticipates its direct leasing will rise from 8% of deliveries in the second quarter to about 15% of deliveries in the third quarter, “as we have reached our funding limit with a banking partner,” the company wrote in its letter to stockholders in early August. “We anticipate adding new partners that will allow us to fund our planned growth in the future,” Tesla added.
The electric car manufacturer launched its captive, Tesla Finance, in April 2014 through which the leasing program “remains strong,” according to the company. The company also started to work with U.S. Bank for both loans and leases in October 2014, a partnership that was “growing nicely,” Tom Wirth, former U.S. Bank senior vice president, told Auto Finance News in March of last year.
Tesla leased 6,180 vehicles through its captive financing and 11,280 vehicles through its leasing partner by the end of June, compared with 2,300 vehicles through Tesla Finance and 2,100 vehicles through a banking partner at the same time a year ago, according to quarterly filings with the SEC.
Due to the liquidity available under the new warehouse agreement with Deutsche Bank, Tesla’s cash requirements for its direct leasing program are “significantly reduced,” according to last week’s filing.
“As a result, there would be a corresponding reduction in both the amount of funds that Tesla may raise from the public market, as well as the amount of dilution to Tesla’s existing stockholders from such fundraising activities,” the company wrote.
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