Japan backs almost a third of $6.6 billion loans to Nissan

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The Japanese government has guaranteed nearly a third of the 713 billion yen ($6.65 billion) in loans Nissan Motor has secured from its major lenders to weather the coronavirus pandemic, according to three people with knowledgeable about the plans.

The automaker, looking to return to profitability and stop pouring cash, has secured 350 billion yen ($3.25 billion) from its biggest lender, Mizuho Financial Group, of which 200 billion ($1.86 billion) is backed by the state, the sources informed Reuters on Friday.

Among other lenders, the Development Bank of Japan will lend 180 billion yen ($1.67 billion), while Mitsubishi UFJ Financial Group is going to lend 120 billion yen ($1.11 billion), the people stated on condition of anonymity as the details are not public.

Mitsui Sumitomo will lend 50 billon yen ($0.46 billion), along with some extra U.S. dollar-denominated funding, they said.

Nissan announced the overall funding amount on Thursday but did not mention the lenders.

All four banks refused to comment on the funding breakdown. Only the Mizuho loan is partly supported by the government, the sources said.

Nissan also declared a four-year recovery plan on Thursday. Japan’s No. 2 automaker vowed to cut 300 billion yen ($2.78 billion) in from annual fixed costs and become a smaller, more effective company after the pandemic exacerbated a drop in profitability that culminated in its first annual loss in 11 years.

CEO Makoto Uchida stated the company had ample cash, untapped credit lines and fresh funding to ride out a serious sales decline caused by the coronavirus, but warned the biggest challenge was to enhance the company’s cash flow.

The automaker is grappling with a negative free cash flow of 641 billion yen ($5.95 billion) as of the year ended March 31, which the company anticipates to turn positive in the second half of its financial year.

Still, Uchida and Chief Financial Officer Stephen Ma don’t deny that more funding might be required if the pandemic continues to weigh on sales in the upcoming months.

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