Jaguar Land Rover plans £1bn bond sale

Jaguar Land Rover, the British luxury carmaker, plans to raise about £1bn in its first bond sale since it was acquired by India’s Tata Motors in 2008, the company told the Financial Times.

The move comes as JLR plans to invest £5bn over the next five years to develop new higher-quality vehicles that can rival BMW, Mercedes-Benz and Audi – the three German groups that dominate the luxury end of the business globally.


However, bankers in Mumbai said that the bond sale was also linked to Tata Motors’ intention to dilute the £2.3bn debt it took out to acquire the luxury marques from Ford Motor, the US auto giant.

The Indian group plans to shift part of its debt burden on to JLR’s balance sheet, which has been posting strong revenues in the past five quarters, people close to Tata said.

“The company does not want to comment on the bond sale but we can confirm that we plan to raise £1bn via a bond sale,” Tata Motors told the Financial Times.

Citigroup, Credit Suisse, JPMorgan and Standard Chartered have been hired by JLR to conduct the bond sale, people familiar with the issue said.

The bond sale will be partly in sterling- £500m - and partly in dollars - $400m (£244m) due in 2018, and another $400m due in 2021.

JLR, which returned to profit last year after a deep sales slump during the financial crisis that stretched its owner’s finances, is now in better position to make long-term investments.

S&P assigned a B plus to JLR’s corporate credit rating, as it assess group’s financial risk profile as “aggressive” and its business risk profile as “weak”.

The carmaker plans to spend £5bn on product development and new equipment at JLR’s three UK plants, which together employ just over 17,000 people, with some of it likely to cover new investments at a planned factory in China.

As part of this effort to improve the vehicles’ overall quality, the group also said that it plans hire 1,000 engineers over the next two years, a move that would increase the total number of highly skilled employees to 4,000 people. During the downturn the company shed about 2,500 jobs.

JLR is now the only volume manufacturer of premium vehicles in the UK and the largest investor in automotive research and development and engineering. It spends about 50 per cent of its materials budget with UK suppliers, and earlier this year announced more than £2bn of supply contracts in the UK, specifically for the new Range Rover Evoque model.

Profit after tax for Jaguar Land Rover was £275m for the third quarter of the current financial year, the fifth consecutive quarter of profit, driven by higher sales volumes, improvements in margins and efficiency measures, including strong sales in the UK for both Jaguar and Land Rover models.