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Nissan seeks $4.6bn credit line to raise liquidity amid pandemic

Troubled carmaker looks to creditors, including Mizuho, for cash

Nissan, like other big automakers, is scrambling to raise cash as sales dry up due to the coronavirus pandemic.   © Reuters

TOKYO -- Nissan Motor is seeking a credit line worth 500 billion yen ($4.6 billion) from Japanese banks, led by Mizuho Bank. The move is aimed at staving off funding problems for the Japanese automaker as vehicle sales plunge amid the new coronavirus outbreak.

The Japanese automaker decided to make the request at a board meeting on Tuesday, sources told the Nikkei. Its creditor banks are expected to agree to the request.

Nissan believes the funding is necessary as the epidemic is far from over, despite signs of peaking in some countries, such as Italy. 

All Nissan plants in Europe and North America are currently idle.

Nissan had liquidity of 1.4 trillion yen ($12.9 billion) as of the end of December, including 1.2 trillion yen in cash equivalents and 214 billion yen in liquid securities. The new credit line will add to the liquidity commitment already provided by the banks, worth 500 billion yen.

That amount, however, is still much smaller than that of Toyota Motor, which has around 6 trillion yen of liquidity on hand.

Nissan's ratio of liquid assets to short-term liabilities stands at 1.67, according to data from QUICK-FactSet, compared with 2.67 at Ford Motor and 2.46 at Toyota.

Global automakers are scrambling for cash as sales have dried up around the world, raising the risk of a squeeze. Toyota, for instance, has asked Sumitomo Mitsui Bank and MUFG Bank for a credit line of 1 trillion yen. The automaker also raised the amount of bonds it can issue by 100 billion yen.

Among U.S. companies, General Motors has already drawn down some of its credit line and has added $16 billion to its liquidity holdings. Ford has also drawn down $15.4 billion in cash.

The coronavirus outbreak complicates the challenges facing Nissan, which saw the arrest of its former chairman, Carlos Ghosn, in November 2018. Last year its unit sales slumped 8.4% on the year to 5.17 million vehicles.

As the coronavirus has spread around the world, Nissan has been forced to shut down its plants in Europe, North America, Southeast Asia and India.

Carmakers face large fixed costs, such as wages. Meeting these expenses becomes more difficult when a company is unable to generate revenue from sales.

Nissan's sales woes are also likely to complicate its plans to revamp its business, which it is expected to announce in May. The plan is likely to be costly, involving capacity and payroll cuts.

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