Jaguar Land Rover Turnaround Fails to Dislodge Short Bond Bets
Range Rover Evoque Sport sport utility vehicles (SUV) and Land Rover Discovery Sport sport utility vehicles (SUV) sit on a transporter outside Jaguar Land Rover Plc’s assembly plant, a unit of Tata Motors Ltd., in Halewood, U.K. (Photographer: Matthew Lloyd/Bloomberg)

Jaguar Land Rover Turnaround Fails to Dislodge Short Bond Bets

(Bloomberg) -- Short sellers are still circling bonds from Jaguar Land Rover even as the British luxury carmaker embarks on a savings plan to tackle larger-than-expected losses.

Shorts on JLR’s bonds have more than tripled since the start of the year to $283 million across the carmaker’s notes in dollars, euros and pounds, according to data from IHS Markit Ltd. The positions are holding near a record $328 million reached last month, the data show.

Jaguar Land Rover Turnaround Fails to Dislodge Short Bond Bets

JLR is pursuing a 2.5 billion-pound ($3.2 billion) turnaround plan after its parent, India’s Tata Motors Ltd., posted larger-than-expected losses in the second quarter. Still, the restructuring plan will not be enough to remove negative pressure on the company’s credit grade in the short-term, Fitch Ratings said on Wednesday.

A spokeswoman at JLR declined to comment on the short positions.

Junk-rated JLR has already seen downgrades this year from the three largest ratings companies as it battles weakened demand in China, unfavorable diesel regulations and potential adverse impacts from Brexit negotiations.

The cost of insuring JLR’s bonds against losses in the credit-default swaps market jumped to the equivalent of 744 basis points earlier this month, an all-time high, according to data from CMA. The five-year contracts are currently quoted at the equivalent of 705 basis points, indicating a 46 percent probability of default in that period, the data show.

©2018 Bloomberg L.P.

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