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Bond Market News
Nissan Downgraded to BB; Reports Suggest Honda-Nissan Merger Could be Back on the Table
March 10, 2025
Nissan Motors was downgraded by a notch to BB from BB+ by S&P, noting remote prospects of significant improvement in the company’s profitability in the near term. The company’s restructuring efforts, including JPY 400bn ($2.7bn) in cost reductions, will take until fiscal 2026 to fully materialize. Challenges such as inflation, rising EV sales, and competitive pressures, especially in China and the US, will continue to weigh on earnings. The company faces declining competitiveness in key markets, varying regional electrification trends, and growing financial burdens. Its net cash position in the automotive segment has weakened, and free cash flow turned sharply negative in 2024. The company’s turnaround remains uncertain amid execution risks and a tough business environment. Nissan was recently downgraded by Moody’s and Fitch to Ba1 and BB+ respectively.
Additionally, Nissan’s financial struggles may take a new turn as CEO Makoto Uchida is reportedly set to resign within the week. His departure could revive merger talks with Honda, which previously fell apart due to ownership disputes. Earlier this year, Honda and Nissan engaged in formal merger discussions, which seemed like a lifeline for Nissan. However, the talks collapsed when Honda proposed that Nissan become a subsidiary rather than an equal partner in a newly formed conglomerate.
Nissan’s bonds traded stable with its 5.55% 2029s at 99.2 cents on the dollar, yielding 5.76%.
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