Tuesday, April 28, 2009

Tata Motors to sell $745 mln bonds in May

India's Tata Motors aims to sell 37.5 billion rupees ($745 million) of bonds in May to close a bridge loan, three banking sources with knowledge of the deal said on Tuesday.

India's top vehicle maker took a $3 billion loan to buy the Jaguar and Land Rover brands from Ford (F.N) before the credit crunch hit last year. The company, which has $100 million in cash, has to close the residual $2 billion loan in June.

Tata Motors, which began bookings for the world's cheapest car, Nano, this month will sell bonds in the domestic market between mid and late May in maturities of two, four, five and seven years, the sources, who declined to be named, said.

The bonds will be guaranteed by top lender State Bank of India, to help Tata Motors tide over rating downgrades, they said.

"The book is being built and the response has been robust so far," one source said, adding the five-year tenure will carry a coupon of 7.5 to 9 percent, compared with up to 11 percent Tata Motors had offered for one-year paper.

A spokesman for Tata Motors, India's leading truck and bus maker, declined to comment on the plans.

Citigroup, SBI Capital Markets and Tata Capital are the offer managers, the sources said.

The company plans to sell 8 billion rupees of 2-year bonds, 3.5 billion of 4-year, 14 billion of 5-year and 12 billion rupees of 7-year bonds as it looks at long-term funds to replace the bridge loan, the sources said.

The global economic crisis hit the company hard, reducing demand for its mainstay trucks and buses, hurt margins and affected its fund raising plans.

But the worst may be over. Its March sales fell 13 percent on year but rose nearly a quarter from February. The Nano bookings, with buyers having to fork out about 95 percent of the 100,000 rupees ($1,988) base price, would also give the firm easy money.

Tata Motors is expected to disclose the response it got on the Nano bookings on Tuesday.

Shares in Tata Motors, which has a market value of $2.3 billion, were trading 3.6 percent lower at 239.90 rupees at 0635 GMT in a weak Mumbai market that was down 1.6 percent.

The stock has jumped 50.7 percent in 2009, compared with a 16 percent rise in the benchmark index, after tumbling 78 percent last year.

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