Nothing is free

7 May 2009 By Una Galani Follow @ugalani

The government is seeking its pound of flesh from the lossmaking luxury carmaker in return for facilitating a £800m bailout. If the demands drive parent Tata Group to decide it can do without state help, it s a winning move.

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The UK government has demanded the right to appoint a chairman and veto redundancies at Jaguar Land Rover as a condition of supporting a bailout package for the struggling carmaker, according to note issued on May 6 by Howard Wheeldon, a senior strategist at BCG Partners.

JLR was acquired in a £2.3bn debtfunded deal last year by India's Tata Motors.

The government is willing to guarantee only half the £340m loans the European Investment Bank approved on April 7 for JLR to use on green technology developments. If JLR takes up the loans, it must pay a fee of 15% of the new borrowings, said Wheeldon.

JLR has been seeking more than £500m in loan guarantees from the UK government since the end of last year.

The government said in response to Wheeldon's circular that the primary financing responsibility rests with the parent company and that the government had been actively encouraging Tata to put together a longterm funding package.

On May 6, the government agreed to grant vanmaker LDV a £5m bridging loan to allow Malaysian vehicle importer Weststar time to complete due diligence on a potential rescue takeover.

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JLR was acquired in a £2.3bn debtfunded deal last year by India's Tata Motors.

JLR has been seeking more than £500m in loan guarantees from the UK government since the end of last year.

On May 6, the government agreed to grant vanmaker LDV a £5m bridging loan to allow Malaysian vehicle importer Weststar time to complete due diligence on a potential rescue takeover.

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