Jaguar Land Rover Bonds: Tata Motors wants to avoid borrowing while China calls for major depreciation

The company does not plan to change its preference for unsecured funding, Birgbauer said.

Jaguar Land Rover, after a $ 4 billion cut, a drop in sales in China and uncertainty around Brexit, said the conditions did not allow it to borrow on the bond market and it sought funding alternative.

The luxury automaker needs to raise $ 1 billion within 14 months to replace maturing bonds, while fueling an investment program for electric cars that run on cash. To support itself, JLR could increase a debt service or turn to other bank financing, with other options, including badet leasing and export credit. said treasurer Ben Birgbauer during an interview.

JLR's owner, Tata Motors Ltd, shocked investors Thursday by revealing the extent of the problems faced by his British arm in China. Jaguar's sports car and SUV Land Rover sales dropped by 35% in the world's largest car market on December 31, bringing the unit to a loss of 273 million pounds ($ 354 million) save 30% on Tata. Stock.

"Market conditions are currently less favorable in general and our bonds are trading at a lower level, reflecting our recent financial performance," Birgbauer said by phone. "We have always said that we are watching the debt market and looking to issue debt when market conditions are more favorable."

The UK's biggest automaker cuts 4,500 jobs, about 10% of the workforce, because of slower sales. This figure is in addition to the 1,500 people who left the company in 2018. These measures will result in a single charge of £ 200 million during the quarter.

JLR's 4.5% bonds maturing in January 2026 dropped to a low of 77 cents per euro, a return of approximately 8.9%, based on Bloomberg prices.

The company does not plan to change its preference for unsecured funding, Birgbauer said. Remaining resources include an unused credit facility of £ 1.9 billion and £ 2.5 billion in cash, based on quarterly figures published by Tata.

Dealer Crisis

According to a statement from the UK company, one of the biggest problems facing JLR in China is its inefficient dealer network. Only 18% of outlets are in so-called first-tier cities, such as Shanghai and Beijing, and more than a third have been open for three years or less.

The company is now planning to reorganize its business, reducing shipments to reduce inventories and investing in measures to strengthen its brand, logo and slogans.

In a conference call with investors, leaders said it was impossible to predict when Chinese volumes would begin to recover, highlighting international trade tensions and government stimulus as key factors. JLR claims to be able to further increase its global sales during fiscal year 2020 with the help of other markets and the launch of the revamped Range Rover Evoque.

Prior to this week, concerns over JLR's performance focused on the impact of Brexit and the government crackdown on diesel vehicles, which led to a decline in car sales in the UK.

Royal London Asset Management had already reduced its exposure to JLR because of "Brexit-specific risks and their ability to maintain access to capital markets," said Azhar Hussain, Head of Global High Yield Division.

Investor appetite for riskier European debt securities has not yet rebounded after volatility swept the market at the end of last year. There have been very few junk debt sales in Europe this year and the high yield spreads remain much wider than before their fourth quarter eruption.