Tata Motors Limited, the leading Indian car and heavy commercial vehicle manufacturing company are in talks with the legendary US-based car manufacturing company Ford Motors regarding the acquisition of Jaguar and Land Rover luxury brands by Tata Motors. In January this year, Ford declared Tata Motors as the successful bidders for the above-mentioned brands of Ford Motors. Market observers opine that this deal may cost Tata Motors around US $ 3 billion. Around US $ 2.5 billion funds would be spent on acquisition of the above-mentioned brands of Ford Motors and the rest would be used as working capital for the new entity of Tata Motors.
Industry sources reveal that Tata Motors is planning to fund the deal from banks like JP Morgan Chase & Co., Citi Group, BNP Paribas SA, Standard Chartered Plc., State Bank of India, ING Group NV, Bank of Tokyo Mitsubishi UFJ Ltd., Calyon, Mizuho Financial Group Inc.
Tata Motors Limited is borrowing corporate loan at 3.01% for three months LIBOR (London Inter Bank Offer Rate). It was further decided that Tata Motors will pay less than 2% points above the LIBOR towards repaying fee and interest.
However, no Tata Motors official has confirmed the reports, as yet. Industry sources believe that this deal may be too big for Tata Motors to swallow. Further, experts believe that this deal may also have a negative impact on the balance sheet of Tata Motors because it cannot outsource from India and it is very unlikely that these cars would be on sale in India. Experts point out, that the shares of Tata Motors declined by 11% after Ford Motors declared Tata Motors as the successful bidders for Jaguar and Land Rover luxury brands in early January this year. In addition to that its credit ratings went down on account of credit default swaps linked to its debt. If the acquisition of Jaguar and Land Rover Luxury brands materializes, Tata Motors may feel the heat of the pension liabilities arising out of this acquisition.
