Tata Motors has postponed plans for an overseas equity issue and sale of investments to repay the $3 billion bridge loan it took in June last year to acquire the Jaguar and Land Rover (JLR) brands from Ford.
The company has now asked its lenders to refinance about $2 billion of the bridge loan as a term loan. The bridge loan is due for repayment on June 1, 2009.
The company will continue to pursue further divestment plans as outlined earlier, judiciously and in the right market conditions.
The company had repaid $1 billion of the bridge loan from the proceeds of a rights issue and stake sales in group firms Tata Steel and Tata Teleservices to other Tata companies.
Tata Motors could not raise the remaining amount by April 2009, as originally planned, owing to the tightening global market following the sub-prime meltdown.
It has also not been able to raise a planned $500 million to $600 million through an equity issue in an overseas market.
Tata Motors had taken the bridge loan last year at 100 basis points over the benchmark London Interbank Offered Rate (Libor). Owing to the global liquidity crunch, the best borrowing programmes are available for about 400 basis points over Libor.
We remain NEUTRAL on the stock.