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TATA Motors on Tuesday raised Rs 1,250 crore by selling non-convertible debentures (NCDs) to Life Insurance Corporation of India (LIC). The NCDs bear a coupon of 10%, and have a maturity of seven years. The debt is part of a larger fund-raising programme to refinance the bridge loan taken at the time of the Jaguar Land Rover acquisition.
Merchant bankers, familiar with the transaction, said only 2% of the total coupon payment is to be made on a quarterly basis. The remaining payment will be made upon maturity. Crisil has assigned a rating of stable to the debentures, based on the irrevocable and unconditional guarantee provided by the State Bank of India.
Tata Motors plans to sell two-year, four-year and five-year bonds in the coming weeks, said a banker requesting anonymity. The money will be used to refinance the $3-billion loan taken last year to buy the marque UK-based brands of Ford Motor, Jaguar and Land Rover. A substantial portion of the bridge facility has been refinanced, Standard & Poor's said in a recent report. Tata Motors used the $1 billion raised through a rights issue last year and the money from the sale of stakes in subsidiaries to bring down the debt to $1.88 billion. JLR's discussions with UK govt continue
"AFTER our recent communication with Tata Motors, we expect the company to be able to successfully complete its bridge facility refinancing before the due date of June 2, 2009," said Standard & Poor's credit analyst Manuel Guerena.
Bankers said the company has opted for the practice of 'rear-ending' of coupons, so that it has lesser outgo of cash per quarter. For instance, under the regular mode of full-coupon payment, the five-year paper would entail an outgo of Rs 153 crore per year. But the 'rear-ending' of payments would restrict the outgo to around Rs 36 crore a year, helping the company save valuable cash in difficult times.
The indicative coupon rates are 6.75-7.25% for the two-year bonds, 8-8.5% for the four-year bonds and 8.25-8.75% for the five-year bonds. Each of these papers are guaranteed by SBI, helping the auto maker to price its bonds competitively, and bypass a possible downgrade by rating agencies.
This is the second time in the past seven months that Tata Motors has raised funds from LIC, after the sale of Rs 1,000 crore NCDs last November. Reliance Industries, Larsen & Toubro, Mahindra & Mahindra, the Aditya Birla group and Tata group have raised money from LIC in the past one year, taking advantage of the financial resources available at the disposal of the country's largest life insurer.
In a parallel development, the fundstarved Jaguar Land Rover continued its discussions to seek the UK government's guarantee to raise £340-million loan for capital expenditure and developing fuelefficient engines and cars.
gaurav.pai@timesgroup.com
Tata Motors plans to sell two-year, four-year and five-year bonds in the coming weeks, said a banker requesting anonymity. The money will be used to refinance the $3-billion loan taken last year to buy the marque UK-based brands of Ford Motor, Jaguar and Land Rover. A substantial portion of the bridge facility has been refinanced, Standard & Poor's said in a recent report. Tata Motors used the $1 billion raised through a rights issue last year and the money from the sale of stakes in subsidiaries to bring down the debt to $1.88 billion. JLR's discussions with UK govt continue
"AFTER our recent communication with Tata Motors, we expect the company to be able to successfully complete its bridge facility refinancing before the due date of June 2, 2009," said Standard & Poor's credit analyst Manuel Guerena.
Bankers said the company has opted for the practice of 'rear-ending' of coupons, so that it has lesser outgo of cash per quarter. For instance, under the regular mode of full-coupon payment, the five-year paper would entail an outgo of Rs 153 crore per year. But the 'rear-ending' of payments would restrict the outgo to around Rs 36 crore a year, helping the company save valuable cash in difficult times.
The indicative coupon rates are 6.75-7.25% for the two-year bonds, 8-8.5% for the four-year bonds and 8.25-8.75% for the five-year bonds. Each of these papers are guaranteed by SBI, helping the auto maker to price its bonds competitively, and bypass a possible downgrade by rating agencies.
This is the second time in the past seven months that Tata Motors has raised funds from LIC, after the sale of Rs 1,000 crore NCDs last November. Reliance Industries, Larsen & Toubro, Mahindra & Mahindra, the Aditya Birla group and Tata group have raised money from LIC in the past one year, taking advantage of the financial resources available at the disposal of the country's largest life insurer.
In a parallel development, the fundstarved Jaguar Land Rover continued its discussions to seek the UK government's guarantee to raise £340-million loan for capital expenditure and developing fuelefficient engines and cars.
gaurav.pai@timesgroup.com
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