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Part 2 – The wind in the Willows by Kenneth Grahame (Chs 06-09)
The repayment for loan taken by Tata Motors to acquire famous British car brands Jaguar and Land Rover gets difficult by the day. It is learnt that Tata Motors now plans to issue bonds to raise Rs 5,000 Crore to refinance part of the Rs 10,000 Crore ($2 billion) bridge loan.
Remember that Tata Motors had taken a total of Rs 15,000 Crore ($ 3 billion) to finance the acquisition of the marquees from Ford Motors. The money was raised by a consortium of banks that included Indian and international financial institutions. The loan and the deal were overseen by the Citigroup and JP Morgan that acted as the lead managers.
Tata Motors had paid a part of the loan Rs 5,000 Crore ($ 1 billion ) and is yet to repay the remaining amount.
Sources in banking sector revealed that State Bank of India and other banks will provide the guarantee for raising the funds from the issue of bonds. Tata is expected to release the bonds this year and will have a maturity period of 2-7 years. As another exercise, analysts speculate that Tata will also use a part of the Rs 2,500 Crore raised through booking for Tata Nano, the world’s cheapest car. The company had garnered a total of 2.03 lakh bookings. However, the hype surround the launch of the Nano car has forced auto analysts to predict 5 lakh bookings. The bookings amount deposited with Tata Motors will be used to re-finance a part of the loan.
Tata Motors had raised the earlier Rs 5,000 Crore after selling the rights issue and stake in Tata steel and Tata Teleservices to other group companies. The remaining about is due for payment on June 1, this year.
Earlier, the company had planned to raise funds through overseas equity issue and sale of some of its investments made in the Tata Group. This could realize any funds as the world markets slumped suddenly and many countries were caught in the economic crisis. Tata re-thought all the avenues possible and hit upon the idea that a large portion of funds could be raised by way of bonds.
While half of the repayment will be met by way of bonds, the remaining half will be raised through term loans, speculate analysts However, the biggest challenge before the company is not only to repay the loans but also to retain full control over the functioning of JLR. The UK government wants to have a greater say in the functioning of its favourite car brands. Meanwhile, JLR is asking for financial guarantees for which Tata has approached the UK government for help If caught I the midst of different interest that clash together, Tata Motors has little chance of continuing its ownership. On the face of it, it appears that Tata Motors cannot walk away from the JLR deal now as it has already made huge investments and is planning on restructuring the plants. JLR has three production facilities and has nearly 16,000 workforce. Tata is also busy launched its new Jaguar models that has created sensation in the automotive world. But Land Rover is yet to pick up from the economic downturn
Tata Motors has its task cut out, even as it deals with several conflicting interests. Tata may b forced to sell off some of its overseas interests to repay the loan, if economic conditions worsen. That wil not be good for the company in the long run.
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For the past 15 years, Cancun has thrived as one of the most desired overseas real estate investment and relocation hotspots for North American second home buyers. In recent years, the dream of owning property along the Yucatan Peninsula has also become increasingly attracting European investors.
Many buyers making their initial enquiries into the tropical paradise become confused when trying to understand the Mexican real estate trust agreements, otherwise known as a Fideicomiso. The processes involved in acquiring Mexican real estate are relatively straight forward, yet a little bit of initial knowledge can go a long way in comprehending the regulations relating to the purchasing processes.
As Cancun and the majority of the most sought after investment and relocation areas of Mexico are located along the coastal regions, they also fall into restricted zones. While previous to 1994 foreigners were not able to purchase real estate in Mexico, the changes in the law to attract foreign investment were accompanied by the zoning restrictions. Areas of Mexico falling into these restricted zones include any land within 50km of the coastline, or 100km of the country’s borders.
A Fideicomiso trust agreement is required when purchasing property within the restricted zones. The trust agreement enables the equivalent of a title deed ownership, authorised by the Mexican government. The trust agreement is set up by a Mexican bank acting as a trustee, with a validity of 50 years.
The foreign buyer becomes the beneficiary to the trust, enjoying full ownership rights such as the ability to re-sell, rent, mortgage and inherit. The bank acting as the trustee is legally obliged to respect the buyer’s full rights and follow any instructions provided by the benefactor.
Regulations by the Mexican government ensure that only selected banks are authorised to hold the real estate trusts, where full examinations of the legal paperwork for the properties are carried out prior to completing the purchase. Upon expiry of the Fideicomiso, if not automatically renewed, the benefactor retains full rights to all the profits resulting from the use or sale of the real estate.
Since the granting of permission for foreigners to purchase real estate in Mexico’s restricted zones, the demand for properties has sharply increased. Long established as a preferred holiday destination, the attraction of foreign investment for boosting the Mexican economy has lead to relaxing the laws towards real estate ownership. Real estate developments have been increasingly modified to comply with the demands of foreign buyers, with luxury properties constructed to typical US criteria becoming standard constructions.
When planning to purchase property in Mexico, the use of a legal representative familiar with the local processes is vital for ensuring full understanding of the processes involved. Continued demand is seeing capital gains continuing to grow, with rental demand providing exceptional returns in sought after areas of this year-round destination.
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