Jaguar Land Rover bond risk falls most on record as China sales revive

Sentiment toward Jaguar Land Rover (JLR) Automotive is improving at an unprecedented pace, after stabilisation in its China business helped the premium British carmaker’s parent report a narrower loss than expected. So say the debt markets, where credit-default swaps insuring against default at the company dropped a record 268 basis points in October to 538. The cost to buy protection against JLR bond non-payment had been as high as 943 basis points in February.

JLR’s retail sales in China grew at double digits for the three months through September as new product launches boosted sales. The number had plunged by double digits for 12 months in a row before the revival.

The carmaker’s turnaround could have legs as China sales continue to rise, and as the company tightens its belt further, according to a note from Nomura Holdings.

After solid second-quarter results, JLR may consider an unsecured issue to refinance a bond maturing this month, Joel Levington, director for credit research at Bloomberg Intelligence, wrote in a note.

Moody’s Investors Service, S&P Global Ratings and Fitch Ratings all still have a negative credit outlook for JLR due to risks including uncertainty around Brexit and the US threat of tariffs on car imports from Europe. 

With the bulk of its manufacturing in the UK, JLR is the most exposed among automakers to a disorderly Brexit, according to Fitch.

Meanwhile, JLR’s Indian owner Tata Motors reported a narrower-than-expected loss helped by the stabilising sales in China. The company lost Rs 220 crore ($31 million) in the three months ended September against a loss of Rs 1,640 crore projected by analysts on average.