Tata 'seeks $3b loan' for auto brands
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Jaguar cars on sale at a dealership in Cambridge, United Kingdom. Bloomberg News |
Tata Motors Ltd, the Indian automaker that's in talks to buy Ford Motor Co's Jaguar and Land Rover luxury units, is seeking to raise $3 billion in loans to fund the purchase, according to three people with direct knowledge of the deal.
The company plans to raise the money from nine banks, including Citigroup Inc and JPMorgan Chase & Co, said the people, who declined to be identified because the information isn't public.
Taking out a bank loan as opposed to selling bonds is cheaper for Tata Motors after the credit default swaps linked to its debt rose to a record on concerns of a ratings downgrade. Shares of India's largest truckmaker have declined 11 percent after Ford announced Tata Motors as the preferred bidder on Jan 3.
"It may be too big a deal for Tata Motors to swallow," said Mumbai-based Arvind Jain, an analyst at Religare Securities Ltd. "Tata won't be able to get outsourcing from India and is unlikely to be able to introduce Jaguar or Land Rover to the Indian market at least in the next two to three years. On top of that, the pension liabilities from the acquisition could be huge."
Tata Motors is also talking to Bank of Tokyo Mitsubishi UFJ Ltd, BNP Paribas SA, Calyon, ING Groep NV, Mizuho Financial Group Inc, Standard Chartered Plc and State Bank of India Ltd to arrange the loan, according to the people.
Debasis Ray, a spokesman for Mumbai-based Tata Motors did not respond to three phone calls and an e-mail seeking comment.
Tata Motors will pay less than 2 percentage points above the London interbank offered rate as interest and fee for the loan, said the people. About $2.5 billion will fund the cost of the acquisition and the rest will be used for working capital, the people said. Three-month Libor, a benchmark for corporate borrowing, was set at 3.01 percent yesterday.
Standard & Poor's in January said it may downgrade Tata Motors' credit ratings because the company may struggle to integrate the UK units while increasing its debt burden. Tata's debt is rated BB+, one level below investment grade.
Agencies
(China Daily 03/06/2008 page16)
