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Rating Action:

Moody's downgrades Nissan Motor Acceptance Corporation's long-term senior unsecured rating to Baa1, affirms commercial paper short-term rating at Prime-2; outlook remains negative

20 Feb 2020

Rating action follows the ratings downgrade of the parent company

New York, February 20, 2020 -- Moody's Investors Service, ("Moody's") has downgraded Nissan Motor Acceptance Corporation's (NMAC) long-term senior unsecured ratings to Baa1 from A3. At the same time, Moody's has affirmed its Prime-2 backed short-term commercial paper rating. The rating outlook remains negative.

Today's rating action follows the downgrade of Nissan Motor Co., Ltd. (Nissan, Baa1 negative), NMAC's ultimate parent, to Baa1 from A3 (see separate press release dated 20 February 2020).

Nissan's weaker credit profile could have negative implications for NMAC's access to funding and its financing volumes.

Downgrades:

..Issuer: Nissan Motor Acceptance Corporation

....Backed Senior Unsecured Medium-Term Note Program, Downgraded to (P)Baa1 from (P)A3

....Senior Unsecured Regular Bond/Debenture, Downgraded to Baa1 from A3

....Backed Senior Unsecured Regular Bond/Debenture, Downgraded to Baa1 from A3

Affirmations:

..Issuer: Nissan Motor Acceptance Corporation

....Backed Commercial Paper, Affirmed P-2

Outlook Actions:

..Issuer: Nissan Motor Acceptance Corporation

....Outlook, Remains Negative

RATINGS RATIONALE

The downgrade of NMAC's ratings follows the downgrade of Nissan's long-term rating to Baa1 from A3 reflecting Nissan's weak profitability as it attempts to turn around its US operations, its negative free cash flow, and the ongoing challenges in stabilizing its relationship with Renault S.A. (Ba1 stable) under the new management team.

NMAC's Baa1 long-term senior unsecured rating reflects its ba1 standalone assessment as well as Moody's assessment of the implicit and explicit support from Nissan, resulting in a three-notch uplift in its long-term rating. Moody's assessment of Nissan's implicit support is based on NMAC's strategic importance as a key provider of financing to Nissan's dealers and customers in US (Aaa stable) and Canada (Aaa stable). In addition, its support is formalized through a strong support agreement that, though not a guarantee, includes a number of provisions such as 100% ownership, minimum tangible net worth and sufficient funds to service all of NMAC's obligations.

NMAC's unchanged ba1 standalone profile reflects its relatively stable profitability, sufficient capital cushion and ample liquidity. NMAC has an active securitization program that will enable it to monetize its unencumbered assets in the event that the unsecured funding is not available. Moody's expects that managed receivables will modestly decline in the next 12 months as Nissan benefits from introducing new models in the second half of 2020 in North America. Notably NMAC's asset base declined by approximately 6% in the first half of the fiscal year through 30 September 2019 as the company struggled to sell its older fleet in the US. Despite the slight decline in the asset base, Moody's expects that NMAC's managed debt to equity leverage will be managed to the historical range over the next 12 months. Additional credit challenges include potentially higher cost of funding, resulting in narrower finance margins, but this would occur over time.

Environmental, social and governance (ESG) factors play an important role in Moody's assessment of NMAC's credit quality. As its relationship with Nissan is key to its business, the ESG considerations are closely aligned to those of Nissan. The global automotive industry is undergoing unprecedented change in the face of tightening environmental regulation, changing technology and uncertain consumer preferences, against a flat-to-declining sales trajectory globally over the next several years. Requirements to reduce carbon emissions in core markets and the consequent need to invest more in alternative fuel technologies will continue to pressure Nissan's margin.

Governance concerns are also significant. Since the ouster of its former chairman Carlos Ghosn for alleged misconduct, uncertainties around Nissan's relationship with Renault have yet to be settled, posing a challenge to the new management team installed in December 2019. Combined with a complex cross-shareholder structure with Renault, Moody's believes these governance issues could hamper the company from effectively addressing its business challenges, including realizing more synergies from the alliance.

The negative outlook on NMAC is in line with that on Nissan and reflects Moody's view that there is considerable uncertainty as to whether Nissan can achieve its profitability targets. In May 2019, the company announced it would aim to improve its consolidated operating margin to 6% by fiscal 2022 ending 31 March 2023 (proportionately incorporating its Chinese operations) from 3% it has estimated for fiscal 2019. However, in Moody's view, the company may need to revise down this goal, reflecting the weak results and modest demand in key global markets.

WHAT COULD CHANGE THE RATINGS UP/DOWN

An upgrade of Nissan's ratings would lead to an upgrade of NMAC's long-term ratings, provided that NMAC maintains a stable financial profile and that Moody's assumptions of affiliate support do not weaken.

A downgrade of Nissan's ratings or Moody's weaker assessment of parental support would result in a downgrade of NMAC's ratings.

The methodologies used in these ratings were Finance Companies Methodology published in November 2019, and Captive Finance Subsidiaries of Nonfinancial Corporations published in August 2019. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Nissan Motor Acceptance Corporation is a wholly owned subsidiary of Nissan North America, Inc., which is a wholly owned subsidiary of Nissan Motor Co., Ltd (NML). Nissan Motor Acceptance Corporation is headquartered in Franklin, Tennessee.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Inna Bodeck
VP-Senior Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

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