Nissan to Sell $1 Billion Convertible Bonds for Recovery
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Nissan Motor Co. plans to sell about $5 billion in debt to help fund CEO Ivan Espinosa’s turnaround of the ailing automaker, part of a broader financing initiative to keep operations on track.
The Japanese carmaker will sell 150 billion yen ($1 billion) of convertible bonds for investment in new products and technologies, the company said July 7. Nissan also plans to issue $4 billion in unsecured dollar- and euro-denominated bonds for general corporate purposes, according to Fitch Ratings, which has assigned a BB rating to the debt.
The fundraising is part of Nissan’s broader effort to raise more than 1 trillion yen, including asset sales and lease-back plans for its Yokohama headquarters. Espinosa, who was appointed earlier this year, is seeking to revamp the carmaker, which has an aging product lineup and is facing a huge loan repayment wall next year.
“The focus will be on how much it can convince the market on why it needs to raise capital,” said Nobuhiko Kuramochi, vice president of investment adviser Parasol Co. “It will be difficult for investors to take action until changes, including structural reforms and capital structure adjustments, become visible.”
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The stock fell 4.9% on July 7 after the convertible bond sale was announced, the most since April 11. The shares have declined 30% this year.
Nissan had also planned to take out a 1 billion pound ($1.4 billion) syndicated loan, guaranteed by U.K. Export Finance, by the end of the fiscal quarter, which ended June 30. It wasn’t clear whether that was still on track, given that the internal deadline has passed.
With a BB rating assigned by Fitch for the euro and dollar bonds — indicating speculative-grade debt — investors remain wary, questioning whether Nissan’s planned job cuts and plant closures will be enough to restore profitability after its recent ¥671 billion net loss.
The Nissan bonds are being marketed to investors from the mid-7% area, compared with an average yield of about 5.7% on similarly rated U.S. notes, Bloomberg-compiled data shows. The car company is tapping the market after spreads on U.S. junk bonds tightened back to their lowest since February, while marketwide spreads are near their lowest since the global financial crisis.
Nissan has sufficient capital of about 2.2 trillion yen in cash on hand and credit to last the next 12 to 18 months, Espinosa told Bloomberg TV in May.
The new CEO has announced plans to eliminate 20,000 jobs and close seven of Nissan’s 17 plants by March 2028.
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The measures follow the collapse of talks earlier this year to join forces with Honda Motor Co. Those discussions ended in part due to disagreements about Nissan’s willingness to make deeper cuts to production and personnel.
This financing move highlights broader pressure in the auto industry, as legacy automakers like Nissan navigate costly transitions to electric vehicles and digital technologies. Investors will be closely watching whether the company can successfully implement structural reforms without additional support or deeper alliances following the failed talks with Honda.
