SAN FRANCISCO, March 6 (Reuters) – Rivian Automotive (RIVN.O) plans to sell bonds worth $1.3 billion, it said Monday, as declining demand and high costs ease the cash crisis surrounding electric vehicle manufacturers sharpen.
Shares in Rivian fell nearly 7% in after-hours trading.
Initial investors will have an option to purchase an additional $200 million worth of bonds for settlement 13 days after the bonds are issued, Rivian said in a statement.
The capital from this offering will help facilitate the launch of Rivian’s smaller R2 vehicle family, a Rivian spokesperson told Reuters, adding that convertible debt was “optimal cost of capital versus selling equity at current levels.”
Irvine, California-based Rivian, which makes R1T electric pickups and R1S SUVs, has said its cash balance will fund its operations through 2025. It reported cash and cash equivalents of $11.57 billion at the end of December, up from $13.27 billion a quarter earlier.
In an effort to cut costs, the company laid off 6% of its workforce last month.
Late last year it shelved plans to build vans in Europe with Mercedes (MBGn.DE) and had previously delayed the planned launch of a smaller R2 family of vehicles by a year to 2026 at the $5 billion plant that it builds in Georgia.
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Rivian, which has lost money on every vehicle it builds, is forecasting production for 2023 well below analyst estimates as it grapples with ongoing supply chain bottlenecks after just missing its target last year.
Rivian said the bonds would be “green” bonds, which typically offer companies a chance to raise cheaper debt from investors willing to take a lower yield in exchange for supporting green projects.
Rivian’s bond matures in March 2029, and investors have the option of converting the bonds into cash or stock in the EV maker.
The interest rate, initial conversion rate and other terms of the bonds will be determined at the price of the offering.
Reporting by Abhirup Roy in San Francisco and Isla Binnie in New York; Edited by Leslie Adler and Chris Reese
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