The repayment for loan taken by Tata Motors to acquire famous British car brands Jaguar and Land Rover gets difficult by the day. It is learnt that Tata Motors now plans to issue bonds to raise Rs 5,000 Crore to refinance part of the Rs 10,000 Crore ($2 billion) bridge loan.

Remember that Tata Motors had taken a total of Rs 15,000 Crore ($ 3 billion) to finance the acquisition of the marquees from Ford Motors. The money was raised by a consortium of banks that included Indian and international financial institutions. The loan and the deal were overseen by the Citigroup and JP Morgan that acted as the lead managers.

Tata Motors had paid a part of the loan Rs 5,000 Crore ($ 1 billion ) and is yet to repay the remaining amount.

Sources in banking sector revealed that State Bank of India and other banks will provide the guarantee for raising the funds from the issue of bonds. Tata is expected to release the bonds this year and will have a maturity period of 2-7 years. As another exercise, analysts speculate that Tata will also use a part of the Rs 2,500 Crore raised through booking for Tata Nano, the world's cheapest car. The company had garnered a total of 2.03 lakh bookings. However, the hype surround the launch of the Nano car has forced auto analysts to predict 5 lakh bookings. The bookings amount deposited with Tata Motors will be used to re-finance a part of the loan.

Tata Motors had raised the earlier Rs 5,000 Crore after selling the rights issue and stake in Tata Steel and Tata Teleservices to other group companies. The remaining about is due for payment on June 1, this year.

Earlier, the company had planned to raise funds through overseas equity issue and sale of some of its investments made in the Tata Group. This could realize any funds as the world markets slumped suddenly and many countries were caught in the economic crisis. Tata re-thought all the avenues possible and hit upon the idea that a large portion of funds could be raised by way of bonds.

While half of the repayment will be met by way of bonds, the remaining half will be raised through term loans, speculate analysts However, the biggest challenge before the company is not only to repay the loans but also to retain full control over the functioning of JLR. The UK government wants to have a greater say in the functioning of its favourite car brands. Meanwhile, JLR is asking for financial guarantees for which Tata has approached the UK government for help If caught I the midst of different interest that clash together, Tata Motors has little chance of continuing its ownership. On the face of it, it appears that Tata Motors cannot walk away from the JLR deal now as it has already made huge investments and is planning on restructuring the plants. JLR has three production facilities and has nearly 16,000 workforce. Tata is also busy launched its new Jaguar models that has created sensation in the automotive world. But Land Rover is yet to pick up from the economic downturn

Tata Motors has its task cut out, even as it deals with several conflicting interests. Tata may b forced to sell off some of its overseas interests to repay the loan, if economic conditions worsen. That wil not be good for the company in the long run.

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