Jaguar Land Rover Plc, the UK carmaker bought by Tata Motors in 2008, is raising 1 billion pounds ($1.64 billion) from pound- and dollar- denominated high-yield senior notes as low default rates fuel demand for junk debt.
The company is seeking to sell 500 million pounds and $400 million of bonds due in 2018 and a further $400 million of securities due 2021, a banker involved in the transaction said. The proceeds will be used for refinancing existing debt as well as for “general corporate purposes,” the luxury-car unit said in a statement. High-yield bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.
Jaguar Land Rover is selling bonds as falling default rates fuel investor appetite for junk debt, helping drive yields relative to benchmark government debt down 112 basis points this year to 502, according to Bank of America Merrill Lynch index data. Sales of high-yield debt in Europe have risen to 21.6 billion euros this year from 15.8 billion euros in the same period in 2010, Bloomberg data show.
Tata Motors, which is India’s biggest maker of trucks and buses, paid $2.4 billion to acquire Jaguar and the Land Rover sport-utility vehicle brand from Ford Motor Co. in June 2008. The Mumbai-based company is rated Ba3 at Moody’s Investors Service and an equivalent BB- at Standard & Poor’s.
The new notes will be guaranteed on an unsecured basis by Jaguar Cars Ltd., Land Rover, Jaguar Land Rover North America LLC, Land Rover Exports Ltd. and Jaguar Cars Exports Ltd., the company said today. Citigroup Inc., Credit Suisse Group AG, JPMorgan Chase & Co. and Standard Chartered Plc are managing the sale, the banker said, who declined to be identified before the terms are set.
The notes due 2018 will be callable after three years and the 2021 notes callable after five, the banker said. The securities will be sold following meetings with investors in Europe and the US.
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