By Kosaku Narioka

Nissan Motor's debt rating was cut to junk status by Moody's Ratings, days after the Japanese automaker and peer Honda Motor scrapped their planned merger, adding to Nissan's challenges in turning its business around.

The ratings company said Friday that it downgraded Nissan's senior unsecured rating by one notch to Ba1 from Baa3, the lowest investment grade. Moody's maintained its negative rating outlook.

Moody's said the rating action reflects Nissan's weak profitability driven by slowing demand for its aging model portfolio. A slowdown has been evident in China, but now the carmaker faces challenges in the U.S. market as well, it said.

The ratings company said the negative outlook took into account the risks associated with implementing the carmaker's new restructuring plan.

Nissan, in November, revealed a restructuring plan that included cutting 9,000 jobs and reducing its global production capacity by a fifth.

Last Thursday, Nissan and Honda officially canceled their planned merger, less than two months after announcing it. This has placed additional pressure on troubled Nissan, which may now need to seek alternative partnerships. Analysts believe the company will likely look for assistance in strengthening its finances and developing new technology.

Nissan also projected a net loss for the fiscal year ending in March, as it undertakes restructuring efforts to address weak sales.

The carmaker reported having more than 2 trillion yen, equivalent to $13.37 billion, in cash and unused credit lines exceeding Y1.7 trillion in its auto business, as of the end of December.

In March 2023, S&P Global Ratings downgraded Nissan's long-term issuer credit rating to BB+, placing it below investment grade. Last month, S&P revised its outlook on Nissan to negative from stable, while maintaining the rating.

Write to Kosaku Narioka at kosaku.narioka@wsj.com

(END) Dow Jones Newswires

February 21, 2025 05:47 ET (10:47 GMT)

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