Nissan Plans $4 Billion Bond Sale Amid Financial Pressure
Synopsis
Nissan Motor is set to raise as much as $4 billion by issuing bonds denominated in U.S. dollars and euros, a term sheet from the company viewed by Reuters said. This comes after it…
Nissan Motor is set to raise as much as $4 billion by issuing bonds denominated in U.S. dollars and euros, a term sheet from the company viewed by Reuters said. This comes after it was reported that the automaker had sought to get suppliers to delay payments, an indication that Nissan is struggling to keep its cash flow in check.
The Japanese car manufacturer intends to issue five-, seven-, and ten-year bonds in U.S. dollars, with each to raise a minimum of $750 million. Interest rates will run from the mid-7% to low-8% level depending on the length of the bond. It also plans to issue four- and eight-year bonds in euros, aiming for a minimum of 500 million euros ($588 million) each. These euro bonds will have slightly lower interest rates—high 5% to high 6%.
Besides, Nissan will issue a 150 billion yen ($1.04 billion) six-year convertible bond. The proceeds from the issuance will be utilized primarily to repay existing debt. The move follows after the automaker raised $300 million in bonds last year and $800 million in 2021 at significantly lower interest rates.
Credit Ratings Fall as Nissan Struggles with Sales and Product Line
Nissan is also being buffeted by solid financial headwinds. All three of the major credit rating agencies have rated its debt "junk." The downgrade was a result of the company's weak financial results over the past few years. Nissan posted a loss of $4.5 billion for the year ending March and has not made a forecast for the current financial year.
Fitch Ratings says Nissan's credit profile is weaker than that of peers General Motors, Ford, and Stellantis. As much as the company has kept its debt low relative to earnings and has retained a net cash position, its cash and operating margins are lagging.
The firm has close to 700 billion yen in debt owed this fiscal year. Any additional cuts in credit ratings could make it increasingly difficult or costly for Nissan to raise capital in the future.
New CEO Pushes Restructuring as Nissan Tries to Regain Stability
Nissan's new CEO, Ivan Espinosa, has initiated a massive restructuring program to rehabilitate the company. Under the program, 7 of the company's 17 world factories are to be closed down, and around 15% of the company's employees are to be laid off. The process will help economize and improve the competitiveness of the company.
Yet the path forward is not easy. With increasing borrowing expenses, declining sales, and auto industry uncertainty, Nissan's financial plan and leadership choices will be scrutinized in the months ahead.
Stay informed. Stay inspired. Subscribe to Inspirepreneur Magazine’s Newsletter for the latest developments on global conflicts, leadership insights, and strategic innovations shaping tomorrow’s world.
At Inspirepreneurs Magazine, covering entrepreneurship, business failures, and the human stories behind the world's most ambitious founders. She writes at the intersection of strategy and storytelling.
