LONDON: Nissan Motor Co.'s efforts to obtain a loan backed by the UK government raises the question of whether Japan will be pressured to step in and also support the struggling Japanese automaker.
That would be unusual, but not unprecedented.
Japan's Ministry of Economy, Trade and Industry has supervised and supported local companies in the past, from financial backing for low-cost carrier Peach Aviation Ltd. in 2011 to helping consolidate LCD panel businesses in Japan Display Inc. the following year to create a stronger global competitor.
If Nissan's financial situation becomes even more serious, "the Japanese government will have no choice but to take action," Seiji Sugiura, a senior analyst at Tokai Tokyo Intelligence Laboratory Co., said.
"There may be bridge financing" that could allow Nissan to limit the extent of its domestic restructuring, he said.
For the time being, however, it seems it'll be the UK, along with debt capital markets investors, riding to the rescue.
Nissan is seeking to take out a £1 billion ($1.4 billion) syndicated loan, guaranteed by UK Export Finance, Bloomberg News reported Wednesday, after viewing internal company documents.
It's part of a broader plan to raise more than ¥1 trillion ($7 billion) from debt and asset sales considering the carmaker faces a huge loan repayment wall next year.
Various financial institutions have been lined up to contribute to the facility, which will comprise one of the largest components of Nissan's planned fundraising.
UK Export Finance, a government body that aids UK businesses export goods and services by providing financial support, has helped in the past with financing for high-speed rail construction in Turkey and infrastructure in Angola.
Extending a lifeline to Nissan makes sense considering the Japanese car manufacturer operates Britain's largest automaking hub in Sunderland.
Nissan has committed to boost electric vehicle production there with a £2 billion investment and the British government has hailed the project as a vote of confidence in the country's automotive industry after years of uncertainty following Brexit.
"The UK is trying to protect Sunderland," Sugiura said.
Nissan may also raise money by selling some of its stake of around 20% in battery maker AESC Group Ltd., which is based in Japan but controlled mostly by Chinese interests.
Earlier this month, AESC announced plans to push ahead with a second battery factory in Sunderland after getting financing support from UK Export Finance and the National Wealth Fund, as well as other investors.
The recent UK-US trade deal could also offer some reprieve to Nissan, if it's able to export vehicles from Sunderland, which has an annual capacity of 500,000 units, at a lower tariff rate.
US President Donald Trump's 25% tax on all cars imported into the US, which took effect in April, has cast a long shadow over most global automakers. It would be especially painful for Nissan given its precarious financial state.
In Japan, the Nissan facilities set to go under the knife include factories in Oppama and Hiratsuka, near Nissan's Yokohama headquarters, people familiar with the matter have said.
They represent about 30% of Nissan's domestic production, sparking concern their closure may cause widespread economic pain.
Shuttering plants would "inevitably impact a broad range of related industries, including suppliers and logistics, posing a serious risk to regional economies," Bloomberg Intelligence analyst Tatsuo Yoshida said.
"Under such circumstances, Nissan should be actively seeking financing under the most favorable terms available - not only through bonds and UK government-backed syndicated loans - but through a broad spectrum of funding options."
Indeed, the comprehensive fundraising plans underscore Nissan's rapidly deteriorating financial and operational situation, despite efforts by Chief Executive Officer Ivan Espinosa to turn the company around.
Espinosa presented the options to the board earlier this month with the goal of securing some funding within the quarter that will end June 30.
The proposal, which is also slated to include the rollover of some debt, doesn't yet appear to have been approved by Nissan's board, leaving it unclear whether it will happen.
On top of any fundraising, Espinosa announced plans earlier this month to eliminate 20,000 jobs and close seven of Nissan's 17 plants by March 2028.
Nissan has sufficient capital of about ¥2.2 trillion in cash on hand and credit to last the next 12 to 18 months, Espinosa told Bloomberg TV earlier in May.
More than two decades ago, Nissan found itself in a similar situation, with a weak product lineup and dwindling cash.
Back then, the Japanese government endorsed a groundbreaking deal: Nissan's capital tie-up with Renault SA. The French automaker sent in Carlos Ghosn, who pulled the Japanese producer back from the brink and into recovery.
In 2018, Ghosn was arrested in Japan and accused of underreporting his compensation, charges that he denied before and after fleeing the country in 2019.
Ever since, Nissan has struggled to regain its footing.
Now, Yoshida said, if Nissan were to obtain meaningful support via Japanese government channels, it's "hard to imagine the company having the luxury of turning it down."
