Nissan Motor seeks £3.71 billion credit line as Coronavirus hurts production and demand

Nissan Motor seeks £3.71 billion credit line as Coronavirus hurts production and demand

  • Nissan approaches lenders to seek £3.71 billion credit line to cushion the impact of Coronavirus.
  • The automaker had £4.99 billion of negative free cash flow for its automotive unit in December.
  • Nissan Motor to stop paying its 10,000 furloughed employees in Tennessee and Mississippi.

The Coronavirus pandemic has weighed heavily on the global auto industry. Several manufacturers have recently reported a massive decline in sales. Owing to the same reasons, sources informed on Thursday that Nissan Motor (TYO:7201) has approached major lenders to seek £3.71 billion worth of credit line.

Nissan has taken a massive hit due to the ongoing health crisis that has severely disrupted production and has brought global demand to a near halt. Considering the existing challenges of the Japanese automaker even before the outbreak, however, experts see Nissan as more vulnerable than its competitors to the economic blow from COVID-19.

Nissan’s Financial Struggle Started Before The Outbreak

The Japanese car manufacturer was already struggling to generate profits last year due to the ongoing scandal surrounding its former leader Carlos Ghosn and aggressive expansion plans which continued for years.

As per the sources, Nissan is preparing for an extended impact of the health emergency on production and demand as it requests additional funding from the lenders. The sources requested to remain unanimous as they lacked the authorization to talk to the media. The automaker’s representative couldn’t be approached for a comment.

In a recent report, the Nikkei business daily had revealed that Nissan has approached Mizuho Financial to secure financing. Other lenders named in the report included two prominent commercial banking group, and Development Bank of Japan which could offer support to Nissan Motor.

As per the company data released in December, Nissan had £4.99 billion of negative free cash flow for its automotive unit.

Nissan To Stop Paying Its Furloughed U.S Employees

Nissan had furloughed workers at its U.S plants in March but continued to pay 80% of their salaries during this period. In an announcement on Tuesday, however, Nissan said that it will no longer be able to pay its furloughed employees in Tennessee and Mississippi as it urged the workers to apply for unemployment benefits. The move is likely to affect roughly 10,000 workers of the automaker in the two states.

At the time of writing, Nissan is exchanging hands at £2.69 per share in the stock market that translates to an around 45% decline in 2020 so far.

Owing to its financial challenges last, its performance in 2019 was also downbeat with an annual loss of around 25% in the stock market.

Nissan Motor currently has a market cap of around £11 billion and a price to earnings ratio of 34.06.

By Wajeeh Khan
Mr. Khan specialises in Public Health by academia but is a trader by passion. Taking up two new hobbies of writing and trading in his teen years, he is now a professional trader and news writer with over 5 years of experience in various financial markets. Khan is passionate about bringing insightful articles to his readers and hopes to add value to their portfolios.

Investing is speculative. When investing your capital is at risk. This site is not intended for use in jurisdictions in which the trading or investments described are prohibited and should only be used by such persons and in such ways as are legally permitted. Your investment may not qualify for investor protection in your country or state of residence, so please conduct your own due diligence. This website is free for you to use but we may receive commission from the companies we feature on this site. Click here for more information.