UPDATE 1-India's Tata Motors raises $425 mln in offshore bonds to pare debt

(Adds Tata Motors statement to the stock exchange, background)

NEW DELHI, June 3 (Reuters) - Indian automaker Tata Motors has raised $425 million through unsecured offshore bonds at a rate of 4.35% to refinance existing debt and meet expenses, according to a term sheet of the deal seen by Reuters.

In a statement to the stock exchange, the company confirmed the fund raising and said it will use 225 million pounds ($318 million) of the proceeds to refinance existing loans and the rest to meet corporate expenses.

The bonds have a maturity date of June 2026, it said.

Tata Motors, which owns British luxury brand Jaguar Land Rover, said it received “significant interest from investors across Asia and Europe” with the bond issue over-subscribed by over five times.

The bond issue has a ‘B’ rating from Standard & Poor’s Ratings Service.

In India, a AAA rated state-run firm would need to pay around 5.9% for raising 5 year funds at the current levels, making offshore fund raising attractive despite the currency conversion costs. Offshore sales also enable bond issuers to raise larger sums and diversify their debt-investor base.

About two dozen Indian companies collectively raised $14.01 billion abroad in 2020, down from $26.5 billion the previous year, according to data from Dealogic, a global analytics firm.

Tata Motors had net automotive debt of 409 billion rupees ($5.6 billion) at the end of last fiscal year through March 31. The company said in 2020 it plans to be net debt free at the end of three years.

Bank of America, BNP Paribas and ANZ were the lead managers on the deal, the term sheet showed. ($1 = 0.7067 pounds) ($1 = 73.1050 Indian rupees) (Reporting by Aditi Shah, additional reporting by Swati Bhat in Mumbai Editing by Shri Navaratnam)