Tata to Borrow $3 Billion for Jaguar and Land Rover Purchase
By Brendan Moore
The Financial Times and Reuters is reporting that Tata has instructed its advisor banks, Citigroup and JP Morgan, to arrange for approximately $3 billion dollars USD in financing from nine different banks towards their purchase of Jaguar and Land Rover from Ford.
Since the purchase of the two iconic British luxury brands is expected to cost around $2 billion USD, the obvious conclusion one must reach is that Tata intends to use the excess capital to pour back into the brands for development. This is an extremely positive sign for Jaguar and Land Rover fans, as well as for the work forces at the respective manufacturers. Tata is apparently in for the long haul and intends (as they have stated) to be good stewards of the two companies going forward.
Tata considered selling bonds to cover the desired amount, but the recent credit-default swaps in the market linked to its overall debt rose to a record after concerns about a ratings downgrade and very quickly the bank financing become much more attractive.
From an enthusiast’s perspective, though, as opposed to a finance angle, the important take-away here is that it looks like Tata is making plans to spend some money on Jaguar and Tata as soon as they acquire the two companies, and that is always a good thing. We shall hope that they spend that money wisely.
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