[TOKYO] Nissan Motor is expected to sell some of its upcoming US$4 billion foreign-currency bonds at a record-high coupon, piling more pressure on the struggling Japanese automaker as it seeks to turn around its business.
The 10-year dollar notes are being marketed at a yield of around 8.125 per cent, according to sources familiar with the matter. Its previous highest coupon was 7.5 per cent on a 10-year bond issued in 1986, data from Bloomberg shows. Final pricing is expected later on Thursday (Jul 10).
Management turmoil has distracted the company ever since the 2018 arrest and ouster of former chairman Carlos Ghosn, leading to an ageing product lineup, shrinking margins and the loss of an early lead in mass-market electric cars.
Nissan is facing corporate bond redemptions of about one trillion yen (S$8.8 billion) between 2025 and 2026, data compiled by Bloomberg shows, and the funding is critical for the carmaker after a failed tie-up with Honda Motor.
Its earnings have deteriorated and cash flows have shrivelled over the years as sales dropped, with the company posting a 670.9 billion yen net loss for the year ended March 2025.
The management remains optimistic about the use of proceeds and financial improvements despite the steep borrowing rates.
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“We don’t believe the funding cost will pose an excessive burden,” Nissan said in an emailed statement to Bloomberg, emphasising it plans to invest in electrification and other growth areas to improve long-term profitability.
Meanwhile, financial markets have voted with their feet. On Tuesday, the company’s five-year credit-default swaps, a key gauge of credit risk, surged to their highest level since 2009.
In February, Moody’s Investors Service downgraded Nissan to speculative grade, after S&P Global Ratings made a similar move in 2023. Currently, it’s rated Ba2 by Moody’s and BB by S&P, both the second-highest junk ratings. Such ratings lead to investor demands for higher yields.
“Both bond and equity investors are sceptical about the potential success of the company’s turnaround plan,” said Todd Duvick, head of autos at research firm CreditSights.
This is Nissan’s first foreign-currency bond sale in about five years. In 2020, when it still held the lowest investment grade rating from both Moody’s and S&P, the company raised 1.1 trillion yen via US dollar and euro bonds, including 10-year dollar notes priced at 4.81 per cent.
Japanese firms have increasingly turned to global markets for their borrowing needs. Junk-rated issuers such as Rakuten Group and SoftBank Group have drawn strong overseas demand. Nissan’s deal will test the sustainability of that trend.
“Struggling companies can only raise a limited amount in Japan’s domestic market,” said Kazuma Ogino, senior credit analyst at Nomura Securities. “For larger funding needs, the offshore market is the more viable option.”
Rising uncertainty around US tariff policy has discouraged Japanese investors from buying automakers’ bonds in the secondary market, said Haruyasu Kato, a fund manager at Asset Management One.
“That makes the deal more challenging,” he said. “Yet, the fact that they are proceeding shows commitment to restructuring. If they can raise this amount, it’s a credit-positive sign.”
A Nissan spokesperson said the offering will refinance upcoming offshore maturities and that the company intends to issue foreign bonds regularly to diversify funding, manage risk and retain global market access.
“It very much needs healthy capital and liquidity to execute its cost-saving initiatives and to invest in product development and sales,” said CreditSights analyst Duvick. “Investors know this and, in my view, are requiring Nissan to pay up for the near-term risk and the tough spot the company is in, by charging relatively high coupons to loan the company money.” BLOOMBERG