Joe Leahy in Mumbai and John Reed in London , Financial Times, 22nd May, 2009
Tata Motors is expected on Monday to obtain the agreement of its banks to roll over about $1.05bn in debt, rescuing India’s largest carmaker from the brink of default.
The extension of the loan until the end of 2010 will complete the refinancing of a $3bn bridge loan Tata Motors took out last year to finance its acquisition of Ford’s Jaguar and Land Rover marques. The loan is due next Friday.
But the Indian group still faces an uphill task to save Jaguar and Land Rover. It has pumped £800m-£900m ($1.25bn-$1.41bn) into the struggling UK-based carmakers to cover operating losses since the car industry’s crisis began last year.
It is also seeking UK Government loan guarantees worth more than £800m to raise further capital, people familiar with the matter said. Tata Motors made what was perhaps the most ill-timed acquisition by a large Indian company in recent years when it paid $2.3bn for Jaguar and Land Rover last year, just as the world financial crisis was heating up.
A plunge in the sales of the UK marques and a crash in Tata Motors’ domestic market last year left the Indian carmaker dangerously close to defaulting on the bridge loan.
Tata Motors made what was perhaps the most ill-timed acquisition by a large Indian company in recent years when it paid $2.3bn for Jaguar and Land Rover last year, just as the world financial crisis was heating up.“
Tata Motors has slowly clawed its way back, prepaying $1.11bn of the bridge loan through equity fundraisings and other measures. This week, it raised an additional Rs42bn ($885m) from a domestic bond issue, a deal that has set the stage for the rollover of the $1.05bn remaining of the bridge loan.
People familiar with the Tata Motors refinancing said that interest on the dollar-denominated rollover loan would be set at the London interbank overnight rate plus 500 basis points, up from Libor plus 175bp for the earlier bridge loan. They said about 80-90 per cent of the syndicate of 27 banks involved in the negotiation on the rollover had agreed to the plan to extend the loan until December 2010.
Citigroup is lead arranging a syndicate of 27 banks on the foreign dollar loan and is also lead arranging the local bond issuance.
Pramit Jhaveri, Head of Global Banking for Citi in India, declined to comment on the dollar loan but said: “The domestic financing is the latest step in the refinancing for Tata Motors in a very difficult environment and is testimony to the Tata name.”
Tata Motors said: “We are in the final stages of the rollover of the bridge loan, and this will be concluded next week.” The resolution of the debt owed by Tata Motors will free the company up to deal with the thornier issue of obtaining finance for Jaguar and Land Rover.
[Source: Financial Times]
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