Consortium to fund Tata Motors’ acquisition to be expanded

Consortium to fund Tata Motors’ acquisition to be expanded
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First Published: Sun, Mar 30 2008. 01 24 PM IST
Updated: Sun, Mar 30 2008. 01 24 PM IST
Mumbai: The consortium of banks mandated to raise the $3 billion for funding Tata Motors’ acquisition of the iconic brands-Jaguar and Land Rover-is likely to consist of around 25 banks which will help distribute the financial burden amongst them.
The consortium, which presently comprises eight mandated lead arrangers--State Bank of India, Citibank, J P Morgan, Standard Chartered, BNP Paribas, Tokyo Mitsubishi UFJ, Mizuho Financial group and ING--has approached about 80 lenders in India and abroad, a source close to the development told PTI here.
“We are in talks with nearly 80 domestic and International banks. We are looking at expanding the size (of the consortium) to around 25, depending upon the availability of suitable partners,” the source said.
A higher number of banks in the syndication will help to comfortably distribute the financial burden, the source said, adding “the consortium would complete the fund raising programme in the next three months.”
Foreign banks which have been approached include many ‘deep-pocket´ lenders such as Chinese Construction Bank, amongst the four largest in mainland China, French banking major Natixis, Industrial Bank of Korea, Australia’s ANZ, Taiwan Cooperative Bank and National Bank of Dubai.
Besides, the consortium has also sent invites to Barclays, HSBC, DBS and Singapore-based United Overseas Bank, amongst others.
Domestic banks which have been approached include the country’s largest private sector lender, ICICI Bank, HDFC Bank, Axis Bank and state-run Bank of Baroda, Bank of India, Indian Overseas Bank and Indian Bank to name a few, the source said.
Tata Motors had initially appointed Citibank and JP Morgan as its advisors for the deal while the country’s largest lender SBI was later appointed as one of the lead arrangers.
The source said a major portion of the funding would be mopped up from the Asian markets and the UK through bridge loans having a maturity 12-15 months. The interest rate would be about 1.10% above Libor.
However, the participating entities are free to resort to other routes as well to raise their portion of the funding through debt or from their deposit-base, the source said.
The consortium participants will normally receive commissions in the range of 0.25-0.50% of the total deal amout as per industry benchmarks, the source said, adding that the figure may vary according to the period of funding and the amount raised.
Besides funding the $2.3 billion Jaguar deal, Tata Motors also plans to use the amount raised to fund its other strategic plans, the source said.
Though the amount Tata has to pay Ford for the acquisition is $2.3 billion, the Indian auto major’s outgo might turn out to be marginally higher to include technology, R&D and engine supply costs as well, the source said.
State Bank of India, which has emerged as the leading merchant banker in the country in the past two years, is expected to pump in around $400 million along with the other mandated lead arrangers.
SBI has sealed around 40 deals worth about $27 billion in 2007, contributing around 15% to the bank’s revenues.
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First Published: Sun, Mar 30 2008. 01 24 PM IST