JLR says 'no thanks' to offer of state backing for loan

Click to follow

The parent company of Jaguar Land Rover (JLR) said yesterday that it expects to be able to secure funding from the European Investment Bank (EIB), without asking the British Government for loan guarantees.

A condition of the £340m EIB loan, which India's Tata Motors says is crucial to the long-term viability of the luxury car-maker, is that the company receives loan guarantees from a triple-A rated organisation. Although JLR has not yet secured the guarantee elsewhere, the company says it does expect to make a new announcement in the coming weeks, implying that non-UKgovernment-backed institution is likely to provide the guarantees.

Triple-A ratings are reserved only for highly creditworthy governments, or government agencies. The company also said it was in discussions with commercial banks for further funding. "With the positive trend in the external environment in financial markets and improvement in general liquidity, these arrangements have been and are expected to be concluded without necessitating guarantees from the UK Government, for which discussions had been ongoing for some time," Tata said in a statement.

Last September, the company said that it needed between £450m and £500m to secure the future of the group's plants in the West Midlands and Merseyside. JLR had asked the Business Secretary, Lord Mandelson, to guarantee as much as £175m in working-capital loans from banks and the £340m EIB loan that would have helped safeguard 14,000 UK jobs.

Lord Mandelson said: "The fact that the banks and commercial capital markets are meeting JLR's funding is a clear sign of confidence in the company. The Government had offered bridging finance from the Automotive Assistance Programme, if necessary. We understand the Tata group will now be successful in resolving longer-term financial needs."