Hong Kong: The country’s largest commercial vehicle manufacturer, Tata Motors Ltd, has signed a deal to receive a $3 billion (Rs12,180 crore) one-year bridge loan from Citigroup Inc. and JPMorgan Chase and Co. to help finance a potential purchase of luxury brands Jaguar and Land Rover, officials familiar with the deal said on Tuesday.
“It is signed, but it’s still at an early process,” said one of the officials, who was not authorized to speak to the media.
Another official briefed on the deal later said the loan would be for one year. Citigroup, JPMorgan and Tata Motors all declined to comment.
Tata is expected to agree on a deal by the end of the month to purchase the two well-known UK brands from US auto maker Ford Motor Co., according to media reports in India. Tata Motors could raise up to $4 billion on domestic and overseas debt markets, based on its previous announcements and media reports.
Tata is also believed to need money to help pay for the manufacturing of the world’s cheapest car, the Tata Nano, that it will launch in the second half of the year.
But Tata will face a tough debt market environment, as a global financial crisis has raised the premiums demanded by investors, especially from riskier Asian issuers.
Credit rating firm Standard and Poor’s placed Tata Motors on review for a possible downgrade in January from its current “BB+” rating, citing the potential increase in its debt load from the acquisition of the venerable Jaguar and Land Rover brands.
Investors have also worried about the amount of leveraged loans held by US lenders, which had in previous years helped to finance a boom in mergers and acquisitions by lending the money to acquirers and then selling off the loans to other investors.
Investors are eagerly awaiting quarterly earnings results from US financial firms, including Lehman Brothers Holdings Inc., and Goldman Sachs Group Inc. later on Tuesday, for further clues about soured debt holdings in the sector.
JPMorgan on Sunday announced it would buy stricken Bear Stearns Companies Inc. for just $2 a share, valuing the US investment bank at about $236 million in a bailout that had received partial backing from the Federal Reserve.