Fraught four-month-long negotiation between Tata Motors-owned Jaguar Land Rover and the United Kingdom government over a loan guarantee ended in an anti-climax on Tuesday, with the Mumbai-headquartered automobile maker announcing that it has secured loans from commercial banks and would not need any support from the UK government.
Even though neither Tata Motors nor JLR specified how much it raised, it is understood that this could be in the vicinity of Pound 175 million (Rs 1,400 crore).
Tuesday's announcement comes a day after JLR said it had successfully secured a financing facility of up to Pound 75 million (Rs 600 crore) for Land Rover's working capital needs from Burdale Financial Ltd, a member of the Bank of Ireland Group.
Tata Motors and JLR also expect a long-term loan from the European Investment Bank (EIB) of Pound 340 million (Rs 2,700 crore) to be successfully secured in the coming weeks through "appropriate commercial arrangements".
"With the positive trend in the external environment in financial markets and improvement in general liquidity, these arrangements have been and are expected to be concluded without necessitating guarantees from the UK government, for which discussions had been ongoing for some time," said a statement from Tata Motors.
Tata Motors bought JLR from Ford Motor Company for $2.3 billion in mid-2008 and had funded this through $3 billion worth of debt.
For now, neither Tata Motors nor JLR are willing to share the source of this £175 million that has been secured. However, market sources said commercial banks both in India and the UK have agreed to lend money to JLR on commercial terms.
JLR's CEO David Smith said, "It is a positive sign for our business that we have been able to attract sufficient funding for our short-term needs through normal commercial means. This has always been our desired route and it clearly demonstrates recognition of the inherent strength in our business and faith in our future business plans."
Welcoming the development, UK's Business Secretary Peter Mandelson said, "The fact that the banks and commercial capital markets are meeting JLR's funding is a clear sign of confidence in the company, its products and the automotive sector."
Tata Motors has been involved in tough negotiations with Mandelson to secure the UK government's support without any condition that might seemingly interfere with its day-to-day operations. Last month JLR reiterated its stand that it would not offer a board berth to the UK government in return for a loan guarantee.
The issue of securing a guarantee from the UK government came to an end today after Tata Motors' Chairman Ratan Tata wrote to Mandelson informing him that the company had secured loans without the UK government's aid.
Industry analysts, however, expressed disappointment at the fact that while JLR's competitors in France and Germany managed to get their respective government's support, iconic British brands had failed to get the UK government's support.
