Tesla Gets $5 Billion Credit Line in Sign It's Nearing Investment-Grade Status

Tesla Inc. has secured a new $5 billion revolving credit facility, another sign that the company is nearing investment-grade status.

The electric-vehicle maker may increase the facility by up to $2 billion, according to a filing. Citigroup Inc. is the administrative agent for the revolver, which has a five-year maturity.

Revolvers are like credit cards that a company can use to borrow, pay back, and then borrow again over a period of time. Investment-grade rated companies typically don’t draw on their revolvers and instead use them as a back-up in case other sources of liquidity dry up.

Tesla currently has a high-yield rating one notch below investment grade from Moody’s Investors Service, with a positive outlook. S&P Global Ratings in October upgraded the company to high-grade status. Tesla isn’t rated by Fitch Ratings. The company needs one more ratings upgrade to be considered broadly investment grade.

The car manufacturer is already being treated like a blue-chip company by many investors and analysts. Most of its bonds are unsecured, indicating that investors trust the company’s ability to pay back its dues.

Its credit default swaps — which protect investors from default — are trading more like high-grade swaps than high-yield. Tesla’s five-year CDS is currently trading at 208 basis points.