Tesla (TSLA - Get Report) raised $300 million more than expected this month with a $1.8 billion junk bond offering at a 5.3% yield, as it leads an atypical August rush to issue risky debt before the Federal Reserve tightens monetary policy, CNBC reported.
Companies are eager to issue debt now, as they're trying to get ahead of an expected Fed rate hike and balance sheet trimming before the end of the year that could make debt cost more in September and October than it does now. U.S. high-yield issuance reached $17.65 billion by August 18, up $7.34 billion from July and up $865 million from August of last year.
Tesla's riskier debt issuance this month with a 5.3% yield is slightly above the original guidance of 5.25%, but lower than the 6.6% to 7% yield a bond with a negative B rating should have, according to S&P global ratings director Nishit Madlani. A higher yield typically suggests higher perceived risk.
Tesla's junk bond was the most actively-traded bond earlier this week. The company's stock traded slightly up 0.2% premarket to $353.50.
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