Tesla Motors Inc., the startup electric car-maker that received $465 million in U.S. Energy Department loans, must come up with a speedier repayment schedule after getting a waiver on existing terms.
The Palo Alto, California-based company, led by billionaire Elon Musk, said yesterday in a U.S. regulatory filing that it has until Oct. 31 to submit a proposal for “early repayment” of loan principal to the Energy Department.
Tesla said it received a waiver Sept. 24 from a requirement in the previous loan agreement to maintain a specified current ratio of assets to liabilities, which measures a company’s ability to repay its debts in the next 12 months.
“The department worked with Tesla on a minor technical change to the loan agreement that includes the company submitting a plan to accelerate repayment of the loan,” Damien LaVera, an Energy Department spokesman, said in an e-mail yesterday. “Tesla has made loan payments on time and in full.”
Tesla will meet the deadline for the revised payment plan and will be able to pay back loans in less than the existing 10-year term if it becomes profitable ahead of schedule, said Deepak Ahuja, the company’s chief financial officer.
Tesla, which sells two models of plug-in cars, has yet to turn a profit.
“They would like to explore possibilities that would result in a repayment earlier than 10 years, when we are in a financially sound situation and have access to multiple capital-markets alternatives,” Ahuja said in a phone interview.
“It’s not time-bound,” he said. “It’s more of metrics-based approach. That’s what makes sense for the DOE and us. DOE obviously will not do anything to force us to pay while in the process injuring us.”
Asked if the DOE’s request indicated concern, Ahuja said, “No, the opposite. If you think about it, they have allowed us to draw down the entire loan as recently as four weeks ago. They are willing to work with us on covenants. They recognize the original covenant was done four years ago and the world has changed since then.”
Tesla disclosed the loan amendment yesterday as it cut its revenue outlook for the third quarter because of supplier shortcomings and other delays in accelerating production of its second vehicle, the Model S sedan.
The company said it expects to generate $44 million to $46 million in third-quarter sales, compared with the $83.1 million average of 12 analyst estimates compiled by Bloomberg. It forecast full-year revenue of $400 million to $440 million, down from $560 million to $600 million.
The modification follows another in February that changed terms of the loan the Energy Department gave in May 2010.
Tesla yesterday fell $3.00, or 9.8 percent, to $27.66, in the biggest daily drop since Jan. 13.
The U.S. loan program, intended to spur development of more environmentally friendly cars, also gave money to Ford Motor Co., Nissan Motor Co., Fisker Automotive Inc. and Vehicle Production Group LLC.
The program, particularly the Fisker loan, has drawn criticism from congressional Republicans including vice presidential candidate Paul Ryan, who is chairman of the House Budget Committee, and Iowa Republican Senator Charles Grassley.
“Ensuring that the taxpayer is repaid in full should be standard operating procedure,” Grassley said in an e-mail, commenting about the loan program in general.
“My concern is that as more government-backed ventures begin to have difficulty paying back their loans, there are no clear standards that determine which companies get extra consideration, which are pressed to pay the loan, and which seem to be allowed to continue without much expectation to repay in a timely way,” Grassley said.
Tesla has said it will begin repaying loan principal in December, as required under the lending agreement. Its repayment schedule for interest on the loan began in February, according to yesterday’s filing.
The company, which went public the month after receiving its loan, said in yesterday’s filing it needs to raise additional capital to avoid having to seek another amendment to the lending terms.
Tesla said in a separate filing yesterday that it’s planning to sell 4.34 million additional shares and expects to receive net proceeds of $128.3 million, or $147.6 million if the underwriter, Goldman Sachs Group Inc., exercises its option to purchase additional shares in full.
“We currently anticipate that without raising capital in addition to this offering, we would need to seek an amendment from the DOE to modify the total liabilities to stockholder equity covenant for the quarter ending March 31, 2014, and the two subsequent quarters,” the company said in the filing.
The plan to raise more money “should be unsurprising to investors and in fact could alleviate capital concerns that have increased in recent quarters,” said Amir Rozwadowski, a Barclays Plc analyst, said in a report yesterday. He rates Tesla shares “overweight.”