Nissan clinches $4.5 billion bond deal after orders soar

Nissan Motor Co. has raised $4.5 billion from a junk-bond sale in US dollar and euros, with the embattled automaker offering a record-high coupon on at least one part of the deal to drum up demand. One component carried a yield of 8.125%, topping Nissan’s previous record yield of 7.5% for a 10-year dollar bond issued in 1986, data compiled by Bloomberg showed. Despite concerns around the company’s strategic plans, it still attracted around $11 billion in investor demand for the junk-bond sale, which will help refinance its debt burden. Nissan’s multi-tranche transaction is part of a broader effort to raise more than ¥1 trillion ($6.8 billion), including through asset sales, to turn around the business, and follows a ¥200 billion convertible bond sale by the automaker earlier this week. Nissan shares opened higher on the Tokyo Stock Exchange on Friday, rebounding after five consecutive days of declines. The stock had been falling since news of the company’s offshore bond issuance broke on July 7. The company’s €1.3 billion ($1.5 billion) bond is comprised of a four-year tranche and an eight-year portion of debt. The coupon on the shorter-dated debt is 5.25%, while the eight-year euro-denominated tranche features a 6.375% coupon, according to a person with knowledge of the transaction who asked not to be identified. Nissan’s $3 billion worth of five-, seven- and 10-year bonds priced at yields of 7.5%, 7.75% and 8.125%, respectively. The longest-dated bond priced at 376 basis points over Treasuries. Investors had ordered more than €2.3 billion for the four-year notes, while €1.8 billion in demand was recorded for eight-year securities, according to the people familiar with the transaction. Demand for a three-part dollar issue had reached just over $6 billion by 9:50 a.m. New York time on Thursday, said the people. Representatives for Morgan Stanley and Mizuho, the global coordinators on the bond sale, didn’t respond to requests for comment. A representative for Nissan in the US deferred to their Japanese colleagues for any additional comment. The carmaker posted a net loss of about ¥670.9 billion for the year ended March 2025, hit by sluggish sales at home and abroad, rising fixed costs and impairment charges. The company is pursuing a structural overhaul of its operations, including plans to cut around 20,000 jobs and reorganize its manufacturing footprint. Turmoil at the management level has weighed on the company ever since the arrest and ouster of former Chairman Carlos Ghosn in 2018, which led to an aging product lineup, shrinking margins and the loss of an early lead in mass-market electric cars. Nissan’s earnings have also deteriorated, while cash flows have shriveled over the years as sales dropped. Moody’s Ratings downgraded Nissan twice this year. The credit grader now rates it Ba2, the second-highest junk category. “We don’t believe the funding cost will pose an excessive burden,” a Nissan spokesperson said in an emailed statement to Bloomberg, emphasizing it plans to invest in electrification and other growth areas to improve long-term profitability. Paying up Rising funding costs and interest payments are also increasing concerns. Nissan’s five-year credit-default swaps, a key gauge of credit risk, have surged to the highest level since 2009. Nissan and its affiliates face about ¥1 trillion in combined bond maturities for 2025 and 2026, data compiled by Bloomberg show, and the funding is critical for the carmaker after a failed tie-up with Honda Motor Co. Nissan’s spokesperson said Thursday’s offering will refinance upcoming offshore maturities. The company also said it intends to issue foreign currency bonds regularly to diversify its funding, manage risk and retain access to investors around the world. On the whole, however, credit investors are skeptical about the company’s proposed turnaround plan. Todd Duvick, head of autos at research firm CreditSights, said Nissan needs “healthy” capital and liquidity to execute its cost-saving initiatives and to invest in product development and sales. “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,” said Duvick. Foreign markets Japanese firms have increasingly turned to global markets for their borrowing needs. Junk-rated issuers like Rakuten Group Inc. and SoftBank Group Corp. 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 Co. “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 Co. “That makes the deal more challenging,” he said. “Yet, the fact that they’re proceeding shows commitment to restructuring. If they can raise this amount, it’s a credit-positive sign.” -- By Takahiko Hyuga, Aaron Weinman and Gowri Gurumurthy (Bloomberg) Register here for “Digital strategies for exceptional customer experience,” a free Auto Finance News webinar set for Tuesday, July 15, at 11 a.m. ET.

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