Jaguar LandRover - improving liquidity with new $500m bond
All,
Please find our updated model here. We will update further post the call this afternoon.
Jaguar LandRover will host a virtual roadshow this afternoon, with pricing tomorrow, on a new $500m 2025 Senior Unsecured Notes, to further improve their liquidity. The deal is taking out some short term borrowings and extending the maturities.
Take away and issues to raise on the call (if possible).
Sales numbers released yesterday point to a modest bounce back in sales. China is performing better than the prior year, and although the UK, Europe and the US are down versus prior year, (July-Sept quarter), the uptick in sales has boosted cash flow. Cash balances at Sept 30th improved by c. £300m reflecting the expected positive Free cash flow over the quarter.
However, what impact has the recently launched LandRover Defender had on overall sales numbers?
The Defender reached sales of 4,508 units in September, but given that they sold 48.3k units globally in September, we would have expected higher Defender numbers.
The Defender numbers for the quarter was 12.1k units, so 4.5k in September does not point to increasing sales.
The other point to note concerning the new notes is the additional springing lien covenant that does not exist on the current Senior Unsecured notes. The vast majority of borrowings at JLR is unsecured, but these new bonds have an additional covenant, that to the extend aggregate Specified Indebtedness above £400m is secured on Property, specific subsidiaries or IP, the bond will also become secured. There is a time limit on this springing lien of 2yrs from issue date. This has been a concern of ours about the bonds been “primed” by senior secured indebtedness, and the bond market has acknowledged that with this springing lien.
The Company has previously guided to the market their intention to raise further senior unsecured indebtedness and this deal is in line with guidance.
Happy to discuss,
Tomás
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Tomás Mannion
2 Stephen Street
London W1T 1AN
E: tmannion@sarria.co.uk
T: +44 20 3744 7009
M:+44 7786 705 806
www.sarria.co.uk