Japan backs nearly a third of $6.6bn loans to Nissan: sources

29 May 2020 - 12:43
By Reuters
The Nissan Motor Co headquarters is seen at night on May 27 2020 in Yokohama, Japan.
Image: Tomohiro Ohsumi/Getty Images The Nissan Motor Co headquarters is seen at night on May 27 2020 in Yokohama, Japan.

The Japanese government has guaranteed almost a third of the 713 billion yen ($6.65bn or roughly R115,985,310,000) in loans Nissan Motor Co has secured from its main lenders to weather the Covid-19 pandemic, according to three people with knowledge of the plans.

The car maker, seeking to return to profitability and stop bleeding cash, has secured 350 billion yen (roughly R57,141,245,000) from its biggest lender, Mizuho Financial Group, of which 200bn (roughly R32,531,699,280) is backed by the state, the sources told Reuters on Friday.

Among other lenders, the Development Bank of Japan will loan 180 billion yen (roughly R29,278,529,352), while Mitsubishi UFJ Financial Group will lend 120 billion yen (roughly R19,593,840,000), the people said on condition of anonymity as the information is not public.

Mitsui Sumitomo will lend 50 billon yen (roughly R8,134,450,940), along with some additional US dollar-denominated funding, they added.

Nissan announced the total funding amount on Thursday but did not name the lenders.

All four banks declined to comment on the funding breakdown. Only the Mizuho loan is partly backed by the government, the sources said.

Nissan also announced a four-year recovery plan on Thursday. Japan's No 2 car maker pledged to slice 300 billion yen (roughly R48,990,990,000) in from annual fixed costs and become a smaller, more efficient company after the pandemic exacerbated a slide in profitability that culminated in its first annual loss in 11 years.

CEO Makoto Uchida said the company had ample cash, untapped credit lines and fresh funding to ride out a severe sales slump caused by the coronavirus, but warned that the biggest challenge was to improve the company's cash flow.

Nissan is grappling with a negative free cash flow of 641 billion yen (roughly R104,274,717, 113) as of the year ended March 31, which the company expects to turn positive in the second half of its financial year.

Still, Uchida and CFO Stephen Ma acknowledged that more funding might be needed if the pandemic continues to weigh on sales in the coming months.