Electric van and pickup truck maker Rivian Automotive Inc (NASDAQ:RIVN) plans to issue US$1.3bn (£1.08bn) in green bonds as the California-based group faces a cash crunch amid lowered production guidance for the year ahead.
Investors will have the option to buy an additional US$200mln of the bonds after 13 days. Bonds will mature in March 2029 with the option to convert the bonds into cash or shares in on maturity.
The company said the funds would help facilitate the launch of its smaller R2 vehicle family.
A Rivian spokesperson told Reuters that convertible debt was the "optimal cost of capital versus selling equity at today's levels”.
Rivian reported cash and cash equivalents of US$11.57bn at the end of December 2022, down from US$13.27bn in the previous quarter.
2023 starts with a sputter
Rivian had a problematic start to 2022, marked by missed production targets, executive departures, a revenue miss in its fourth-quarter earnings call, and the third major vehicle recall since going public in November 2021, this time due to a problem with a sensor in the front passenger seat-belt system.
Rivian laid off 6% of its workforce in February, while the group ditched a much-hyped partnership with Mercedes to roll out delivery vans in Europe at the tail end of last year.
“It is disappointing that 18 months later Rivian remains in this spider web of production issues with the worry that customers will start to churn to competitors… as reservations get pushed out,” Wedbush analysts said earlier this month.
The likes of Ford, GM and of course Tesla lie in wait.
Amazon’s partnership with Rivian for the supply of electric delivery vans remains intact, even though production output for 2023 is expected to be less than previously forecast.
The cash burn situation at Rivian puts more pressure on the 2024/2025 timelines, Shore Cap suggested, though according to Rivian, this latest debt round will see operations through to 2025.
Shares are down 7.2% year to date, compared to 6% gains on the S&P 500 index.