Sources associated with the fund-raising exercise said State Bank of India, along with several other banks, was providing a guarantee. SBI Caps, the capital markets division of the bank, is the lead manager.
A banker familiar with the development confirmed that the bonds would be issued this month. SBI Caps, the source said, was in talks with institutional players like Life Insurance Corporation of India as potential buyers. Bankers said the bonds would have a maturity ranging between two and seven years.
In response to a questionnaire, a Tata Motors spokesperson said, "Tata Motors does not have any comments to make."
While half the repayment requirement will be met through the bond issue, the remaining amount is expected to come by way of rupee- and dollar-denominated term loans, a banker said.
Last June, the auto maker availed of a $ 3 billion (around Rs 15,000 crore based at Thursday's exchange rate) bridge loan to finance its acquisition of the two marquee brands from Ford Motor Company. In January, it said it had repaid $1 billion (around Rs 5,000 crore) from the proceeds of a rights issue and stake sale in Tata Steel and Tata Teleservices to other group companies. The remaining amount is due for repayment on June 1.
While the company had initially planned to raise funds through an overseas equity issue and sale of more of company's investments, the plans did not materialise due to adverse market conditions. This prompted Tata Motors to seek refinancing from its lenders to whom it had sent a term sheet last month and was negotiating the interest rate.
However, the plans have been reworked now with a large portion coming by way of bonds, a banker said.
Though the Libor has eased, credit spreads continue to be high making overseas fund raising difficult for Indian companies.
Citigroup and JP Morgan were the lead managers to the $3 billion loan, which was raised with the help of other banks such as SBI, Standard Chartered, BNP Paribas and Tokyo Mitsubishi UFH.
The company's shares gained 3.05 per cent on the Bombay Stock Exchange (BSE) to close at Rs 272.10, while the BSE Sensex gained 1.37 per cent on Thursday.
