Moody’s cuts Nissan rating to junk status

Moody’s Ratings said on Friday it had downgraded its rating of Nissan Motor’s credit by one notch to junk status, citing a weak and worsening outlook for the Japanese carmaker’s credit profile.

The credit-rating firm cut Nissan’s senior unsecured rating to Ba1 from Baa3 and maintained its negative outlook.

In a report, senior analyst Dean Enjo cited “risks associated with the implementation of its new restructuring plan, the renewal of its ageing product range and global trade policies”.

Nissan has been working on a turnaround programme under which it plans to cut its workforce by 9,000 people and global manufacturing capacity by 20% as it struggles with worse-than-expected performance in key markets the US and China.

Moody’s said it expected the free cash flow of Nissan’s car business, which has turned negative in the current fiscal year, to remain in the red throughout the fiscal year starting from April.

The carmaker’s cash flow recovery was at risk from the current global trade environment with potential US import tariffs on its sizeable production base in Mexico, Moody’s said.

It added that Nissan’s automotive business had substantial cash holdings that would provide sufficient liquidity for its negative free cash flow and debt maturities over the next 12 months.

Last month, S&P Global Ratings cut the carmaker’s credit outlook to negative and affirmed its BB+ rating.

Last week, Nissan ended talks with Honda Motor for a possible merger, pitching it deeper into uncertainty. It said at that time it would provide an update on the turnaround programme within a month.

Reuters