Moody's upgrades Jaguar

Moody's Investors Service said it upgraded Jaguar Land Rover Automotive plc's corporate family rating to Ba2 from Ba3, probability of default rating to Ba2-PD from Ba3-PD and senior bonds to Ba2 (LGD4, 52%) from Ba3. The outlook remains stable.

The upgrade was prompted by Jaguar Land Rover's strong and fairly stable credit metrics over the past three years, the agency said. According to Moody's, the company's strong results in the fiscal year 2012/13 were driven by its broadened and competitive model line-up as well as its improved geographic presence in emerging markets, especially in China.

The agency said the Ba2 corporate family rating positively reflects the company's strong brand names, moderate leverage (the adjusted debt-to-EBITDA ratio is 1.8 times for the 12 months ended June 30) and the commitment of its sole shareholder, Tata Motors Ltd., to support Jaguar Land Rover's product strategy, capex plan and financial strategy.

However, Jaguar Land Rover's ratings are constrained by the weak financial performance of Tata Motors on a standalone basis and by some key challenges such as Jaguar Land Rover's small scale as a niche player, the cyclical nature of the automotive industry, Jaguar Land Rover's strong focus on the mature markets of Europe and North America, challenges the company faces in ensuring its model range meets the required emissions and fuel consumption levels in Europe and the United States, Moody's expectation that there will be a sizeable increase in Jaguar Land Rover's capex and research and development expenditure to fund the company's ongoing expansion of its model range, the company's high foreign-exchange rate exposure and Jaguar Land Rover's still relatively limited track record of growth and profitability, Moody's said.

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