UK government dictates terms for JLR loan

07 May 2009

The UK government, which had earlier placed Iceland along with terror groups like the Al-Qaeda to seize the Icelandic bank's assets under British anti-terror laws late last year, has now placed impossible conditions on the JLR management in exchange for underwriting les than half  the €366-million loan passed by the European Investment Bank (EIB) for the automaker.

In an unprecedented move, the UK treasury, has put such onerous and humiliating conditions on JLR for merely underwriting the loan, that commentators say smacks of an attempt at backdoor nationalisation of the maker of the marquee brands.

In early April, the EIB passed JLR's £450 million (€366 million) loan application for making low-emission cars, (See: Tata's JLR receives £340 million from EIB), which required to be underwritten by the UK government prior tyo its disbursal by the EIB.

JLR was also negotiating with the UK government for an additional £500-million working capital loan at commercial rates within two years.

But after a month of negotiations, 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 must pay 15 per cent up front as commission to the government. This would have left JLR with only £150 million.

To sour the deal further, the UK government has asked JLR's owner, the Tata Group to invest £300 million in the company before it would actually underwrite the loan and that too for just six months instead of the three-year period stipulated by the EIB.