Credit Outlook: Rivian

On June 25, Rivian Automotive, the American electric vehicle manufacturer, announced a $5 billion joint venture with German Volkswagen Group. The deal will give $1 billion in proceeds to Rivian up front as part of a convertible promissory note issuance, with a further $4 billion expected through a joint venture that will be jointly owned and operated by Rivian and Volkswagen. The deal brings needed cash to Rivian, which remains a burn rate company that loses money on each vehicle sale (though it is losing less now than it was a year ago). Terms of the joint venture have not been made public, but this gives both companies something they need: optionality for Volkswagen and liquidity for Rivian.

Rivian’s needs are straight forward and fundamental: cash. It remains a fledgling company that will rely on outside capital to build scale. Volkswagen gets optionality. With the convertible note purchase, Volkswagen gets a 4.75% coupon and the possibility of converting to common stock ownership. The joint venture gives both auto makers a chance to combine their respective best practices and benefit from each’s strengths. While details of the joint venture are yet to be published, the short-term benefit to Rivian is that it buys more time and liquidity for its growing operations.