JAGUAR LAND ROVER PLC:

BOND VALUATION
Adit Shah - P41065
Section B
Situation Analysis

● JLR has outstanding senior notes worth$410 Million, issued on May 19, 2011, and due on May
15, 2021 at coupon rate of 8.125% per annum, semi-annually
● To repurchase it, they announced an issue of senior notes worth $500 Million on March 3, 2015
and due in 2020 at coupon rate of 3.5% per annum, semi-annually
● In March 2015, the indicative pricing of older Notes in the Luxemburg Bourse signaled an 11%
premium over face value
● Existing bondholders had an option to sell their holdings to the company or roll over their
existing holdings to the new security
● JLR is planning to raise $500 million in the new issue, which is $90 million more than the
previous issue. This means that JLR is trying to raise more amount than before at a lower
coupon interest rate.
Important Factors

The reason JLR was able to issue new debt notes with less than half coupon rates compare to previous
notes can be attributed to these factors:

● Maturity date of newly issued notes was 1 year early compare to outstanding notes
● Upgradation of JLR’s bond issues from Ba3 to Ba2 with a “stable” outlook by Moody’s
● Multi-currency funding, in USD and GBP also helped JLR to create a natural hedge for
mitigating currency risk because of fluctuating exchange rates
● JLR being the cash cow of Tata Motors with profit share of 80%
● More face value of Notes. It seems clear that JLR want to raise more money which can be used
for more R&D resources, a clear advantage to the business given the highly competitive
industry.
PV of Outstanding Notes wrt New Notes
Outstanding Notes Details (May11 - May21)
May-15 New Notes issuing/outstanding notes repurchasing

Face Value $410.00 Million USD

Coupon Rate 8.125% per annum, semi-annually
Coupon Payment (semi- $16.66 Million USD
annually)
Coupon Payments remaining 12
New Rates 3.50% per annum, semi-annually

Value of Outstanding Notes $511.82 Million ; as per new rates as of May 2015
Value of Outstanding Notes $410.00 Million ; as per old rates as of May 2015
Premium 24.84% Actual
Premium 11% as per Luxemburg Bourse
PV of New Notes wrt Outstanding Notes

New Notes Details (March 15 - 2020)

May-15 New Notes issuing/outstanding notes repurchasing

Face Value $500.00 Million USD

Coupon Rate 3.50% semi-annually
Coupon Payment (semi- $8.75 Million USD
annually)
Coupon Payments remaining 10
Luxembrg Rates 11.00% as per Luxemburg Bourse
Old Rates 8.13% Old notes rates
Present Value of New Notes $358.67 Million ; as per Luxembrg rates wrt old Notes
Present Value of New Notes $406.51 Million ; as per Old rates wrt old Notes
Cont..

● The Present Value of New notes as per the calculation at Luxemburg rates would be $358
Million.
● The Present Value of Outstanding notes as per the calculation would be $511.82 Million.
● So actual cost of JLR in buy backing the Outstanding Notes for New notes would be

PV=(11%/2,10,-8.75M,-500M)= $358 Million

● But ideally for the noteholders to surrender it, they will ask $511.82 Million; assuming all
investors paid in lump sum.

PV=(3.5%/2,12,-16.66M,-410M)= $511.82 Million

Link to worksheet

https://docs.google.com/spreadsheets/d/1uS9HYpoDR6KdA5RXNI938A5F0Ng_KyE2oFmY8-gaVD4/
edit?usp=sharing