Guarantees for almost a third of the 7l3 billion yen ($6.65 billion) in loans that Japans auto making giant Nissan Motor Co has managed to secure form some of its main debtors to tide over the economic hit of the novel coronavirus pandemic, have been provided by the Japanese government, claimed reports in Japan quoting information from sources with knowledge of the plans.
According to the reports, loan of about 200 billion yen out of a total of 350 billion yen that the auto maker has managed to secure from its biggest lender, Mizuho Financial Group, has been guaranteed by the Japanese government. The auto maker is trying desperately to return to profitability and stop burning of cash in the process.
Reports quoting sources with knowledge of the matter also claimed that the Japanese firm has also managed to secure a loan of 180 billion yen from the Development Bank of Japan and another loans worth 120 billion yen from the Mitsubishi UFJ Financial Group.
Sources reportedly said that along with some additional U.S. dollar-denominated funding, Mitsui Sumitomo will lend 50 billon yen.
While making an announcement about the total worth of loans that it had managed to secure on Thursday, Nissan did not name any of the lenders.
There were no comments or reactions available from all four banks about the funding
Sources said that only the Mizuho loan is partly guaranteed by the government.
A four-year recovery plan for a recovery was also announced by Nissan on Thursday. The company outlined its strategy of cutting down on 300 billion yen in costs from its annual fixed expenses while also pledging to reduce its size and scope. It also outlined its aim of transforming into a more efficient company. The company had been troubled even before the novel coronavirus pandemic hit the world and demand for cares. The company reported its first annual loss for this year for the first time in more than a decade.
Enough cash was present at the disposal of the company along with untapped credit lines and fresh funding that it could put to use to tide over the severe drop in demand because of the pandemic, said the company’s Chief Executive Makoto Uchida. But he also warned that improving the company’s cash flow was the biggest challenge.
Nissan has been suffering from and trying to mend a negative free cash flow situation that reached a total of 641 billion yen as of the year ended March 31. The company hopes to turn the negative cash flow into a positive one by the second half of its financial year.
Despite the pledges and assurances, the company could be in need of more funding if the pandemic continued to impact on sales of the company in the coming months, said Uchida and Chief Financial Officer Stephen Ma.
(Adapted from Reuters.com)