Tata Motors' UK subsidiary Jaguar Land Rover (JLR) has secured a £340 million loan passed by the European Investment Bank (EIB) to develop low emission hybrid and lightweight body cars, for the underwriting of which the UK government had placed impossible conditions last year.
The loan was passed with Credit Suisse working as lead arranger for the loan, while Credit Suisse, Standard Chartered Bank, Deutsche Bank and JP Morgan provided additional guarantees along with Indian banks - State Bank of India, Bank of India and Bank of Baroda.
In April, the EIB had passed the Warwickshire-based JLR's £340 million loan application for making low-emission cars. (See: Tata's JLR receives £340 million from EIB)
The loan, being a part of the £2.3-billion package announced by the UK government in January 2009 for the UK car industry, (See: Britain unveils £2.3-billion loan for car industry) should have been underwritten by the UK government, since, as per the terms of the EIB loan, the sanctioned amount could only be disbursed after it was underwritten by a guarantor, in this case, the UK government.
But in an unprecedented move, the UK government had put such onerous and humiliating conditions on JLR for merely underwriting the loan, that commentators had said that it smacks of an attempt at backdoor nationalisation of the maker of the marquee brands.
The UK treasury and the Department for Business, Enterprise and Regulatory Reform (DBERR) told the management of JLR that they would underwrite only £175 million of the £450 million EIB loan for which the carmaker would have to pay 15 per cent upfront as commission to the government. This would have left JLR with only £150 million. (See: UK government dictates terms for JLR loan)