Tata gets $3 billion loan from Citi, JPMorgan: source
HONG KONG (Reuters) – India’s Tata Motors Ltd (TAMO.BO: Quote, Profile, Research) has signed a deal to receive a $3 billion bridge loan from Citigroup (C.N: Quote, Profile, Research) and JPMorgan (JPM.N: Quote, Profile, Research) to help finance a potential purchase of luxury brands Jaguar and Land Rover, a source familiar with the deal said on Tuesday.
The source, who was not authorized to speak to the media on the matter, declined to provide further details including the duration of the loan, noting details had yet to be worked out.
“It is signed, but it’s still at an early process,” the source said.
Bridge loans tend to be of short-term duration.
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 U.K. brands from U.S. auto maker Ford Motor (F.N: Quote, Profile, Research), according to media reports in India.
The Indian firm could raise up to $4 billion on domestic and overseas debt markets, based on its previous announcements and media reports.
Tata is believed to also need money to help pay for the manufacturing of the world’s cheapest car, or the 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.
Standard & Poor’s placed Tata Motors on review for a possible downgrade in January from its current high-yield “BB+” rating, citing the potential increase in its debt load from the acquisition of the venerable Jaguar and the Land Rover brands.
Investors have also worried about the amount of leveraged loans being held by U.S. lenders, which had in previous years helped finance a boom in mergers and acquisitions by lending the money to acquirers and then selling off these loans to other investors.
Investors are eagerly awaiting quarterly earnings results from U.S. financial firms, including Lehman Brothers (LEH.N: Quote, Profile, Research) and Goldman Sachs (GS.N: Quote, Profile, Research) later on Tuesday, for further clues about soured debt holdings in the sector.
JPMorgan on Sunday had announced it would buy stricken Bear Stearns (BSC.N: Quote, Profile, Research) for only $2 a share, valuing the US. investment bank at about $236 million in a bailout that had received partial backing from the Federal Reserve.
(Reporting by Rafael Nam; Editing by Ken Wills)