Hong Kong: The $3 billion (Rs12,150 crore) one-year bridging loan supporting Tata Motors Ltd’s acquisition of the Jaguar and Land Rover brands from Ford Motor Co. is expected to launch to a wider syndication early next week, banking sources said on Thursday.
Tata Motors was named by Ford in January as preferred bidder for the Jaguar and Land Rover brands. The bridge loan is being taken by UK-incorporated special purpose company TML Holdings Ltd, and is guaranteed by Tata Motors. The loan also includes a letter of support from the holding company of Tata group, Tata Sons Ltd, officials said.
The loan is expected to pay an initial margin of 85 basis points (bps) over London inter-bank offered rate (Libor) before stepping up to 120 bps after six months and to 150 bps after nine months.
Mandated lead arrangers Bank of Tokyo-Mitsubishi UFJ, BNP Paribas SA, Citigroup Inc., ING Bank, JPMorgan Chase and Co., Mizuho Corporate Bank, Standard Chartered Bank and State Bank of India are still finalizing roadshow details.
Banks are expected to be offered two ticket levels in senior syndication and three in general syndication. The top-level all-in fee will be around 160 bps for an underwriting amount of $175 million, officials said.
Tata Motors is expected to consider equity issues, divestments and long-term debt financing to reduce the size of the loan. In India, at least four public sector banks and four foreign lenders are likely to join the State Bank of India-led consortium to raise the loan for Tata Motors.
The public sector banks likely to join the consortium of financiers are Bank of India, Bank of Baroda, Indian Overseas Bank and Syndicate Bank, while the foreign banks are Barclays Bank Plc., Hong Kong and Shanghai Banking Corp. (HSBC), DBS Bank Ltd and Singapore-based United Overseas Bank Ltd, an official close to the development said.
“SBI is looking at enhancing the number of entities in the consortium to 20 so that the burden of financing such a huge sum can be distributed amongst them,” the official said.
The country’s largest lender has already started talks with all eight banks to be a part of the consortium and will come out with an official announcement soon, the official said.
Officials said SBI plans to raise the amount by the second half of April to enable Tata Motors to complete the acquisition soon.
SBI has emerged as the leading merchant banker in the country over the past two years and has sealed around 40 deals worth about $27 billion in 2007-08, contributing significantly to the bank’s revenues.
PTI contributed to this story.