Moody’s upgraded the rating for Tesla bonds, considering them a reliable investment.
After S&P in October, Moody’s is the second major rating agency to lift the electric carmaker out of the “junk zone”.
“Tesla will maintain its position as a leading manufacturer of battery electric vehicles,” Moody’s said.
Moody’s Investors Service has upgraded Tesla’s bonds to investment grade status for the first time. The reasons for this are, on the one hand, the dominance of the carmaker led by Elon Musk in the market for electric cars. Second, the company’s efforts to keep costs down would have improved Tesla’s credit rating.
The agency, which assesses the ability of companies to repay bondholders, raised the company’s rating by one notch.
It now gives Tesla a “Baa3” rating, meaning it no longer considers the company’s debt to be “junk” or purely speculative — a rating given to companies that might have trouble paying down their debt.
“The rating reflects Moody’s expectation that Tesla will remain a leading manufacturer of battery electric vehicles with an expanding global footprint and very strong profitability,” said Rene Lipsch, Moody’s senior credit officer, in a statement Notice of Reassessment.
Tesla’s credit rating also upgraded due to prudent financial policies
“The upgrade also includes corporate governance aspects, including Tesla’s prudent financial policies and management’s operational track record,” he added.
Moody’s also cited that Tesla plans to start production of its Cybertruck model later this year, which has also contributed to its upgrade.
Musk set a goal of reducing the cost of building some Tesla models by 50 percent. Earlier in March, the CEO said there was a clear path for Tesla to build a smaller electric car with half the production cost and effort of the popular Model 3, saying “The Wall Street Journal„.
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Tesla’s stock price closed 1.7 percent higher on Monday, following a rally that saw the stock gain 49 percent so far this year.
Rating agencies had shied away from Tesla bonds for years, even though a long-term rise in its share price made the company the eighth most valuable company in the world (by market capitalization).
But S&P Global Ratings downgraded the electric carmaker’s bonds in October 2022 up from the junk area and Moody’s has now followed suit.
Fitch Ratings, the other of the big three agencies alongside S&P and Moody’s, does not currently rate Tesla, meaning the company’s bonds are still not generally rated investment grade here.
This article was translated from English by Jannik Rade. You read the original here.
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