JLR's €366 million EIB loan hits the wall in Whitehall

04 May 2009

The €366-million loan to Jaguar Land Rover (JLR) passed by the European Investment Bank in early April for making low-emission cars, has now hit the wall in Whitehall with the UK government dithering on providing guarantees for the loan.

On 7 April, the EIB had passed the Tata-owned UK car maker's loan application for €366 million, a part of the £2.3-billion package approved by the UK government for the UK car industry. (See: Tata's JLR receives £340 million from EIB / Britain unveils £2.3-billion loan for car industry)

The €366-million loan for making low-emission cars was supposed to be underwritten by the UK government, and the EIB cannot disburse the loans to JLR since the UK government is not willing to guarantee the loan if JLR goes bankrupt.

Media reports, quoting company officials, say they believe the government has deliberately set out tough conditions for underwriting the loan so that it can wriggle out of not committing itself to it.

JLR was also negotiating with the UK government for an additional £500 million working capital loan, with the loan repaid at commercial rates within two years as JLR, had been seeking financial help from the UK government, not because it needed a bailout, but required liquidity to run its day-to-day operations since the UK banks had stopped lending.

But the government apparently wants JLR to provide its plants, factories and current stock of cars as security in order to stand guarantee to the EIB loan as well as for the additional £500 million working capital loan.