Dollar strength puts pressure on Jaguar Land Rover’s debts

Jaguar land rover
Jaguar land rover

Jaguar Land Rover is among the British carmakers facing increased debt refinancing costs after the pound’s slump against the dollar.

Borrowings worth $700m (£627m) need to be repaid or refinanced by February, just as global borrowing costs rise.

Just over a third of the £8.9bn debt held by Britain’s biggest car manufacturer is in dollars.

The pound has rallied since its record fall against the dollar, but at its nadir, the fall from $1.125 to $1.033 would have added £55m to the cost of paying off Jaguar Land Rover’s most pressing $700m parcel of debt if it did so in sterling. The pound is also still down 18pc against the dollar in the year to date.

Jaguar Land Rover (JLR), which makes the Range Rover Evoque and Jaguar I-Pace, also faces the challenge of refinancing its debt as interest rates around the world rise. It has borrowings of $200m which are due for repayment this month and the rate against which the debt is set has risen by 3.53 percentage points since the start of the year.

Aston Martin, Britain’s only publicly listed car maker in London, has borrowed $1.5bn in dollars, paying rates of up to 12pc. Its recent share sale is geared towards paying off some of those borrowings. It recently raised £653m from investors, including Chinese car maker Geely and Saudi Arabia’s Public Investment Fund, in sterling.

Both companies have bought hedging products that insulate them to varying degrees from the sharpest knocks of currency market manoeuvres, although they will each need to renew this protection when the contracts expire.

They also each benefit from sizeable dollar earnings. For Aston Martin, more than four fifths of its earnings are from abroad. The Americas – largely the US – contribute 32pc of sales. JLR makes just under a quarter of its sales in North America.

A JLR spokesman said: “Like most large companies, Jaguar Land Rover has hedging policies to manage currency fluctuations. We continue to monitor the current situation, with volatile market conditions, very closely.”