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Grace, Space, Pace

21 August 2019 by jbchevrel

The UK luxury automobile manufacturer Jaguar Land Rover (TTMTIN 10.3% above k500 – B+/BB-) saw its 5y CDS widen by ~32bp, thus remaining the 9th widest constituent in iTraxx Crossover s31 index. The stock of its parent company Tata Motors fell by over 12%, touching a 52-week low, before finally closing -9.25%. CARE Ratings had downgraded (Monday) Tata Motor’s long term credit rating owing to weak quarterly results by Jaguar Land Rover. It downgraded long-term bank facilities to 'AA-/Negative' from 'AA/Stable', but reaffirmed rating on short term bank facility and commercial paper at 'A1+’. This is after the company posted a massive loss of INR36.8b (>$500m) in Q1-FY20 (July 25th). This was double compared to the INR18.6b loss in the same period of the previous fiscal year. Jaguar Land Rover saw its net revenue stand at INR50.7b, i.e. -2.8% lower than the year before. JLR’s global sales continued to decline in Q2. It was expected, as the company reported -12% in May -10% in June (%YoY rolling). Less bad than the -14% reported Indian sales, but worse than the -5% drop in global sales. Fitch and Moody’s both put a negative outlook on Tata in June. That reflected MIS’ expectation that leverage will remain elevated and free cash flow negative for fiscal years 2020 and 2021. The macro backdrop of Brexit, US-China trade war, a softer sentiment vis a vis global growth, and a lower demand for diesel vehicles in the UK and Europe still weigh. On the former, the UK car production has fallen -20% in H1-2019 because of a decline in exports. Jun-2019 was the 13th straight month of decline. In Q1, JLR had posted £120m PBT, incl £149m redundancy costs and sales down £461m to £7.1b, with higher revenues in the UK offsetting the slide in China.