Nissan Plans to Issue $1.04 Billion Convertible Bonds to Fund Turnaround

On July 7, Nissan Motor Co. announced plans to issue 150 billion yen (approximately $1.04 billion) in convertible bonds to support the turnaround efforts of the struggling automaker under new CEO Ivan Espinosa. The Japanese car manufacturer stated that the funds raised will be used for investments in new products and technologies, including electrification and software-defined vehicles. Following the announcement of the convertible bond issuance, Nissan's stock price suffered its largest decline in nearly three months. During early trading on July 7 in Tokyo, the stock dropped by as much as 5.2%, but by 1:04 PM local time, the decline narrowed to around 3%. Over the past 12 months, the company’s stock has fallen by about 40%. Additionally, a fundraising prospectus reviewed by Reuters on July 7 showed that Nissan plans to issue $4 billion in senior unsecured bonds denominated in U.S. dollars and euros. The prospectus indicated that Nissan intends to issue dollar bonds with maturities of 5, 7, and 10 years, each with a minimum fundraising amount of $750 million. Nissan has informed potential investors that the coupon rate for the 5-year bonds is approximately 7.5%, 7.8% for the 7-year bonds, and 8.1% for the 10-year bonds. Furthermore, Nissan plans to issue euro bonds with maturities of 4 and 8 years, with a minimum fundraising size of 500 million euros (approximately $588.4 million) for each bond. The prospectus indicated that the pricing guidance for the 4-year bonds is around 5.8%, and 6.8% for the 8-year bonds. A week prior to this announcement, Reuters reported that Nissan had requested some suppliers to allow it to delay payments to free up short-term funds, highlighting the cash flow pressures the company has been facing. Nissan has approximately 700 billion yen in debt maturing this fiscal year, and all three major credit rating agencies have downgraded its debt rating to junk status. Bloomberg reported in May that Nissan faces significant loan repayment pressures next year and is seeking to raise over 1 trillion yen through debt financing and asset sales to maintain operations. Last year, Nissan issued $300 million in 5-year dollar bonds at an interest rate of 5.55%. However, Espinosa stated in a Bloomberg TV interview in May that Nissan currently holds about 2.2 trillion yen in cash and credit lines, providing sufficient reserves to support operations for the next 12 to 18 months. Due to declining sales and aging models, Nissan reported a net loss of $4.5 billion for the fiscal year ending in March 2023, and it has not disclosed performance forecasts for the fiscal year ending in March 2026. The new CEO Espinosa has announced plans to lay off 20,000 employees and close 7 out of 17 factories worldwide by the end of March 2028. Earlier this year, merger talks between Nissan and Honda fell apart, partially due to disagreements over whether Nissan should further reduce production capacity and workforce.