Domomic O’Connell and Ben Marlow, The Sunday Times, 12th April, 2009
JAGUAR LAND ROVER is in advanced talks with ministers, banks and its owner, Tata Motors Limted of India, on a £800m refinancing that should ease worries about it running out of cash this year and safeguard 15,000 jobs.
Senior sources said negotiations were at a delicate stage and hinged on whether the Midlands-based carmaker could provide sufficient security to the Government and a syndicate of commercial banks — led by Royal Bank of Scotland and Lloyds — for the loans required. Tata is understood to have agreed in principle to invest another £100m alongside the refinancing.
The Government has asked for the security in return for guaranteeing repayment of a £340m loan from the European Investment Bank (EIB). Directors of the EIB approved the loan last week but the money cannot be given to Jaguar until the terms of the state underwriting are in place.
The sources said ministers had agreed to guarantee about 75% of the EIB money, with Jaguar Land Rover having to put up assets — property, factories and stocks of cars — as security for the rest. Other Jaguar Land Rover assets will have to be pledged to raise the rest of the money. ‘There is a tricky negotiation over exactly what the security available will stretch to,” said one source involved with the talks.
There is a tricky negotiation over exactly what the security available will stretch to,” said one source involved with the talks.
Tata bought Jaguar Land Rover from Ford in June last year for £1.15 billion. The group was then profitable — thanks in large part to strong trading at Land Rover — but sales collapsed as the banking crisis deepened. In March, Jaguar sales were down 30% compared with the same month last year, while Land Rover sales were down 37%.
The Sunday Times revealed in November that Jaguar Land Rover was in secret talks with the Government having made a request for £1 billion in financial aid. Executives said the carmaker was unable to secure commercial loans and wanted the Government to step in and provide a guarantee in order to tide it over a cash-flow crunch later this year.
Since then the negotiations have proceeded at a snail’s pace, with officials and their advisers unwilling to help, given the size and power of the vast Tata business empire. They have been held up by the Government’s deliberations on wider support for the automotive industry, led by Lord Mandelson, the Business Secretary. These are expected to lead to the announcement of a scheme to trade in old cars in return for a discount on new ones in the budget.
Tata, in turn, has been irritated by what it feels is a lack of support for one of the largest investors in British industry; as well as Jaguar Land Rover, Tata owns Corus, the steelmaker that includes the former British Steel. It is understood that Jaguar Land Rover’s cash requirement has been trimmed from £1 billion to just under £800m following a review by accountants KPMG.
[Source: The Sunday Times]
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