Country’s largest commercial vehicle maker Tata Motors, which is seeking a $2 billion term loan for refinancing the bridge loan it took in June last year to acquire Jaguar and Land Rover brands, may not be able to raise the full amount in the US currency due to the global credit crunch.
“Today, it is tough to raise $2 billion in the US currency,” said a banker familiar with the development. “About a third of the refinancing would be done in rupee,” he said. Dollar-denominated loans come at lower interest rates.
In the prevailing market, the interest rate for such a loan is about 400 basis points above the London Interbank Offered Rate (Libor). Corporate loans in Indian currency are currently available for around 10 per cent annual interest rate.
So, about Rs 3500 crore (around $700 million) loan in the Indian currency would mean a larger interest cost burden on the company. The company declined to share any details of the discussions that it was having with its lenders on the issue of refinancing.
Citigroup and JPMorgan were the lead managers of the $3 billion loan, which was raised with the help of other banks such as State Bank of India, Standard Chartered, BNP Paribas and Tokyo Mitsubishi UFH.
The company 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. The company could not raise the remaining amount by April, as originally planned, owing to the tightening global market following the sub-prime meltdown.
On Thursday, the stock of the company closed at Rs 225 on the Bombay Stock Exchange (BSE), a 1.2 per cent gain over the previous closing. The Sensex, the benchmark index of the exchange, gained 0.5 per cent to 10,803 on the same day.