Land Rover Acquisition Essay Example | Topics and Well Written Essays - 1000 words

Land Rover Acquisition - Essay Example Tata Motors took $3bn ($2.3bn for purchasing JLR and the remainder for supplying important parts that included engine and other parts from Ford) bridge loan so as to fund this acquisition at $2.3bn with the aim of paying back a part through right issue, its stake sale in other subsidiaries and raising the rest through long term debt. The bridge loan was raised by Tata Motors, UK (which is a 100% subsidy of Tata Motors). The margin of the interest for the initial 6months on the bridge loan was 85% over LIBOR, followed by 1.2% for the following three months and then up to the end of term at 1.5% ( Gaughan, P. A. 2011). The same was intended to be pated through the rights issue, issue of securities overseas and its portfolio investments divesting. Before, Tata Motors requested to secure the funds using three simultaneous right issues, of which, of which one was o.5% convertible preference shares. However, the company was forced to share its plan for issuing the convertible preference sh ares as the prices of the share of the company fell greatly and remained low till as recent as August 2009. The other 2 rights issue (one was meant to earning Rs.21.86 billion with each other share at Rs.340/- with every share priced at Rs. 305/-) was not able to generate the expected amount of subscriptions from the share holders and required to be bailed out by company’s promoters and the underwriters. Tata Motors was hoping from the past record with both Land Rover and Jaguar would be able to earn enough funds.