Tesla (TSLA) Enters $300M Warehouse Agreement with Deutsche Bank

September 7, 2016 4:25 PM EDT

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Tesla (NASDAQ: TSLA) disclosed the following in a U.S. SEC filing on Wednesday night:

Item 1.01Entry into a Material Definitive Agreement.

On August 31, 2016, Tesla Finance LLC (“TFL”) and Tesla 2014 Warehouse SPV LLC (the “Borrower”), each a wholly-owned direct or indirect subsidiary of Tesla Motors, Inc. (“Tesla”), entered into a Loan and Security Agreement (the “Warehouse Agreement”) with Deutsche Bank AG, New York Branch (“DB”). Under the Warehouse Agreement, which will support the Tesla Finance direct vehicle leasing program, we may borrow up to $300.0 million in total principal amount. The ability to draw under the Warehouse Agreement is scheduled to end on August 31, 2017, and the full amount outstanding under the Warehouse Agreement is due September 20, 2018, in each case subject to acceleration upon the occurrence of certain defined events of default or extension in accordance with the provisions of the Warehouse Agreement. There were no amounts outstanding under the Warehouse Agreement as of August 31, 2016.

The Borrower’s obligations under the Warehouse Agreement are secured by a certificate (the “Collateral”) representing the right to the proceeds of (i) a pool of lease contracts held directly by TFL’s statutory titling trust that are allocated from time to time to such certificate and (ii) the related leased vehicles. Amounts drawn under the Warehouse Agreement bear interest at a rate based on LIBOR plus a fixed margin, currently resulting in an interest rate of approximately 2.0%, or in certain situations based on a rate that is calculated by reference to the prime rate, LIBOR and the federal funds rate. The Borrower and TFL are subject to various customary events of default and financial, lease portfolio performance and other covenants and limitations, including, among others: (i) an advance rate limit based on the Securitization Value (as defined in the Warehouse Agreement) of the lease contracts and related vehicles to which the Collateral relates; (ii) a required reserve account equal to 1.0% of the Securitization Value of the lease contracts and the related vehicles to which the Collateral relates; and (iii) various performance triggers and excess concentration limits. In addition, the Borrower is required to pay fees to DB for the unused portion of the commitment.

Tesla is not a guarantor or other party to the Warehouse Agreement or any of the related documents.

Due to the liquidity available under the Warehouse Agreement, Tesla’s cash requirements for its direct leasing program are significantly reduced. 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.

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