Pathfinder
Automakers were hit hard during the pandemic as production issues mounted and sales declined, but perhaps no automaker was hit harder than Nissan Motor.
The Japanese automaker ended the calendar year with US unit sales down 33% – more than double the decline seen at US competitors General Motors and Ford Motor.
And while Ford contended with a one-notch downgrade to high-yield, Nissan’s fall was steeper. It was downgraded twice by S&P and Moody’s in quick succession, moving from a low Single A credit to the verge of high-yield with Baa3/BBB– ratings and a negative outlook.
Despite those challenges, in September the company priced US$8bn in the US high-grade bond market, selling the largest US dollar deal from a Japanese corporate or financial issuer.
Additionally, the deal was a debut for Nissan Motor and ties the record for the largest automotive bond deal ever – regardless of whether it came from an automaker directly or a financing unit.
The company’s finance unit, Nissan Motor Acceptance, has issued in the market several times and was seen as the stronger entity because few accounts have defaulted on their auto loans amid the pandemic.
Yet Nissan issued out of the parent entity because that’s where the additional funds for car production were needed at the time, said Timothy Blair, managing director of IG debt capital markets at Mizuho.
It was a similar strategy taken by Ford in its debut high-yield deal but Nissan is a more infrequent issuer and required more price discovery.
“They were cognisant that this debt raise [should] not trigger a downgrade,” Blair said. “They are between GM and Ford and that’s why we focused so much on the marketing – we wanted to know what investors thought about Nissan, not only as a debut but how they stood in comparison to the US autos.”
Bookrunners Morgan Stanley, JP Morgan, Citigroup and Mizuho priced a US$1.5bn three-year at 287.5bp over Treasuries, a US$1.5bn five-year at 325bp over, a US$2.5bn seven-year at 387.5bp over and a US$2.5bn 10-year at 412.5bp over. That was 38bp–50bp tighter than initial price thoughts.
The order book peaked at US$25bn despite 13 other issuers announcing deals on the same day and after borrowers had priced US$40bn in the previous two days.
“It was a very heavy calendar we were competing with from a supply standpoint and we were able to market through all of that and Nissan ended up being the star of the day in the investment-grade market,” Blair said.
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