Rive Brothers, Musk To Buy Most Of SolarCity’s Bonds

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SolarCity and Tesla executives are placing millions of dollars towards the solar firm’s latest round of debt as it prepares to be bought by the electric car making giant. The solar installer said in a filing on Tuesday that its chairman and Tesla chief executive Elon Musk have assented to purchase more than 50% of its latest offering of bonds, reports MarketWatch.

Musk putting more of his money up

Hence, Tesla’s CEO will put $65 million towards the overall $124 million that the solar company is expected to raise. Musk’s cousins, Lyndon Rive and Peter Rive, who are also SolarCity’s co-founders and top executives, have also agreed to purchase $17.5 million in bonds apiece. So it comes to around $100 million in total for the three execs.

On Tuesday, Nathan Serota, an analyst at Bloomberg New Energy Finance, said, “Musk is infusing even more of his money,” adding “SolarCity is burning through a lot of cash and they need cash.”

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According to data compiled by Bloomberg, Lyndon Rive is the seventh-largest shareholder in the solar company, whereas Peter Rive is the eighth-largest shareholder.

Musk’s purchasing of SolarCity bonds comes at a time when Tesla is working to conclude its planned acquisition of SolarCity. The solar firm approved the deal earlier this month.

SolarCity: a business based on debt

SolarCity’s business relies on debt as it offers homeowners the chance to install solar power systems with some or no money down, and the company collects monthly payments instead. On June 30 at the end of its most current quarter, the energy company had total debt of $3.25 billion; most of it was in the form of solar asset-backed notes or bonds.

SolarCity depends on institutional investors like Google and large banks to invest in the solar power systems it installs on residential homes. Institutional investors have invested hundreds of millions in the solar installer. The bonds being purchased by the Rives and Musk are a newer type of offering available to the common public which matures in 18 months and pays 6.5% interest, notes MarketWatch.

Private startup Space Exploration Technologies, commonly known as SpaceX, (also run by Musk) has been a big purchaser of these bonds, reported the WSJ recently. Out of a $105 million offering in March 2015, SpaceX bought $90 million and another $75 million in June. These amounts have been reinvested in solar bonds after repayment.

On Tuesday, SolarCity shares closed up 0.3% at $23.09. Year to date, the stock is down almost 55%, while in the last year, it is down almost 44%.