1/ Let’s explore what is likely going now w Tesla bonds.
2/ Almost since issuance, this has traded steadily south – the sign of (a) either a poorly placed deal where buyers have no conviction, or (b) a credit that has performed poorly out of the gate and has seen steady selling. 
3/ Hallmark of HY has always been illiquidity. It’s partly why CDS mkt exploded in size. Well placed HY deals that performed would get put away forever and would rarely trade. It’s why the new issue mkt was so important – you might not have another chance to buy a bond
4/ Lack of price transparency is Hallmark #2. Before TRACE, HY quotes were as much ethereal as based on real trades. With TRACE, transparency better but this is not a deep market. Never will be.
5/ CDS notional was 10-100x of actual face HY issuance because investors that wanted to buy a credit couldn’t, so they would pay the exorbitant cost for CDS instead.
6/ Same w/ shorting credit. Simple supply and demand issue restricted opportunity. Enter CDS.
7/ Right now, HY dealer desks trading Tesla are praying their phones don’t ring. No one positions paper any more. Dealers mostly just cross bonds. But cross to who?
8/ On the run buyers are nervous, see weak protection here, absolutely no coverage of any kind, interest or asset, and recognize that w/o covenants, subordination risk only gets worse. On the run buyers recognize that refinancing risk is everything right now in this name.
9/ Distressed players want to buy 50 cents of assets for 5 cents. They won’t start sniffing until the 5.30’s break 30, if then. Distressed buyers are starting their asset coverage, salvage value analysis now, just to be prepared. Not sure they will get the answers they need.
10/ This is likely to gap down, in a pattern similar to other stressed credits w/o real asset coverage. The days of steady drips down are probably over. Bond salesmen are scouring their lists trying to find people that didn’t play on the new issue.
11/ Next, they have to convince new buyers top step in now, over the noise, but how do they make a value argument? On a spread basis, the bonds are rich. Desks might position bonds, but they aren’t stupid either. Remember Michael Lewis’s first book.
12/ You could be a hero here but why? Forget # of Model 3’s sold. It’s irrelevant. Musk needs to prove he can build a car without lighting dollar bills on fire. He hasn’t done that yet. And it will be months before any signs appear that he has, if ever.
This capital structure, the debt in front of the 5.30’s, the lack of coverage of ANY kind, make this a really dicey name at 86. I wouldn’t touch these bonds here. I doubt many other would either.
