Tokyo, April 28, 2011 -- Moody's Japan K.K. has confirmed the Baa2 issuer ratings
of Nissan Motor Co., Ltd. (Nissan) and its supporting
subsidiaries.
The ratings outlook is stable.
This concludes the review for possible upgrade initiated on February 14,
2011.
The ratings for the following entities are affected:
Nissan Motor Co., Ltd.
Nissan Capital of America, Inc.
Nissan Motor Acceptance Corporation
Nissan Intl. Finance (Netherlands) B.V.
Nissan Financial Services Co., Ltd.
The aftermath of the March 11 earthquake has triggered the rating action
-- a shortage of components and electricity power issues
will negatively affect Nissan's earnings recovery in the upcoming
quarters.
Moody's expects production to return to normal within the year,
however, it is concerned about the uncertainty regarding the quake's
aftermath and the strength of Nissan's earnings recovery thereafter.
Nissan's outlook is stable. Moody's expects the effects
of the quake to be negative on its earnings at least in the short term;
however, the current rating is able to accommodate this outcome
because Nissan can maintain its global market competitiveness and return
profitability to reasonable levels over the medium term.
Before the quake, Nissan's earnings improved in terms of its
unit sales growth due to the market recovery, its rising market
share, and cost savings. In addition, the company's
automobile business attained a positive net cash position.
After rebuilding its damaged facilities, Nissan is still faced with
electricity supply issues and a components supply shortage.
Its domestic rivals recently announced that their production would return
to normal by the end of the year. However, Moody's
also believes that Nissan's production will also return to normal
within the year.
Electricity supply is improving and TEPCO has revised its electricity
supply projection upwards, although this may continue to be a risk
factor for Nissan because its production facilities have high exposure
to TEPCO's electricity supply area.
Components supply is more important because it significantly influences
the global supply chain. A major supplier of semiconductor chips
for automobile manufacturers (that Moody's believes is one of the
important bottlenecks), announced that it would move forward its
restart date at a damaged factory to June 15 from mid-July as previously
projected. However, it is still unclear how quickly the overall
supply chain will return to normal.
Upward rating pressure could re-emerge if Nissan's earnings
return to the recovery path that Moody's expects. Moody's
may consider a positive rating action if Nissan keeps its unadjusted operating
profit margin above 5%. Improvements in Renault's
financial performance and creditworthiness could also positively affect
Nissan's ratings.
On the other hand, factors which could trigger a downgrade include
(1) sizable investments or share buybacks, and which raise leverage
significantly, (2) if the relationship between Nissan and Renault
were to grow closer, in particular on the financial side,
or if Renault's financial situation weakens materially, potentially
impacting Nissan's own financial strength, and (3) Nissan's
brand deteriorates and its market share falls. The rating could
also be downgraded if Nissan's operating margin drops and remains below
3% for two consecutive years.
The principal methodology used in this rating was "Global Automobile Manufacturer
Industry", published on September 30, 2010, and available
on www.moodys.co.jp.
Nissan Motor Co., Ltd., headquartered in Yokohama,
is a leading global automobile manufacturer and is 43.4%
owned by Renault S.A.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's information.
Measures taken to ensure the quality of this information include use of
public information, reviews by a third party and verification by
the lead analyst.
Moody's considers the quality of information available on the issuer
or obligations satisfactory for the purposes of maintaining a credit rating.
Moody's adopts all necessary measures to ensure that the information it
uses in maintaining a credit rating is of sufficient quality and from
sources Moody's considers to be reliable including, when appropriate,
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received in the rating process.
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risk of entities, credit commitments, or debt or debt-like
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Tokyo
Tadashi Usui
Vice President - Senior Analyst
Corporate Finance Group
Moody's Japan K.K.
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Tokyo
Shinsuke Tanimoto
Senior Vice President - Team Leader
Corporate Finance Group
Moody's Japan K.K.
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Moody's confirms Nissan's Baa2 ratings, outlook stable