Press Report : Tata Motors’ share offer raises $750m to reduce JLR debt

John Cranage, Birmingham Post, 12th October, 2009

Jaguar Land Rover parent group Tata Motors Limited has announced a major breakthrough in its fight to secure new funding. The Indian group has raised $750 million (£468.8 million) after issuing more than 29.9 million shares on the world’s stock markets and a tranche of convertible notes.

The money will go towards paying off the £1 billion-plus loan that Tata Motors took out to finance its purchase of JLR from Ford last year. The new equity shares, which will bring in $375 million, are in the form global depository shares (GDSs) priced at $12.54 each that will be listed on the Luxembourg Stock Exchange and will be tradeable throughout the world. A further $375 million will come from the four per cent convertible notes due in 2014.

Tata Motors, which has struggled during the global credit crunch to roll over the $3 billion bridging loan it took out to finance the JLR deal, had originally expected to raise $600 million (£375 million) but the size of the offering was raised by 25 per cent after it was sold out in under an hour.

The swift uptake of the offering was symptomatic of the increasing buoyancy on the international money markets and rising demand for emerging market stock, commentators said. The GDS pricing represents a “tight” 1.5 per cent discount to Tata’s closing stock price of 589.25 rupees on the 8th October, 2009. Citigroup Global Markets, Credit Suisse and JP Morgan are acting as joint bookrunners for the offering.

This is a significant milestone for Tata Motors. This transaction is a re-affirmation of investor confidence in the automotive sector and bears testimony to the trust reposed in the long-term outlook and performance of Tata Motors”. Ravi Kant, Vice-Chairman, Tata Motors Limited

Tata Motors said it intends to use the net proceeds from this offering for repayment of the JLR debt, of which $700 million (£437.5 million) is outstanding and for capital expenditure, working capital and other general corporate purposes.

Vice-Chairman Ravi Kant, who has taken a leading role in helping to steer JLR through global financial crisis, said: “This is a significant milestone for Tata Motors. This transaction is a re-affirmation of investor confidence in the automotive sector and bears testimony to the trust reposed in the long-term outlook and performance of Tata Motors”.

Chief Financial Officer C Ramakrishnan, said: “The offering will augment our long term resources, help us de-leverage and provide us the financial flexibility to pursue our strategic goals.”

The Tata Motors offering came days after JLR announced it had secured a loan of £175 million from the State Bank of India, bringing the total credit it has secured from commercial sources since the start of the credit squeeze to £500 million.

[Source: Birmingham Post]

Clive Goldthorp

About the Author:

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

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