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The Spaminator
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Mazda to raise $2 billion in share issue, loans, Reuters reports
February 21, 2012
Automotive News

TOKYO (Reuters) -- Japan's Mazda Motor Corp. plans to raise $2.1 billion to shore up its finances and invest in a new plant in Mexico, financial sources said today -- a bigger-than-expected fund-raising effort that sent its shares tumbling 10 percent.

The loss-making automaker aims to raise 100 billion yen ($1.3 billion) through a public share offering and 70 billion yen through subordinated loans from banks, two sources with knowledge of the matter said.

If Mazda were to raise 100 billion yen through a new issue at today's closing share price of 145 yen, just under 690 million shares would need to be added, representing a 38.7 percent dilution of existing shares.

"I think share reaction of this size is to be expected for such a large surprising fund-raising," said Kenichi Hirano, operating officer at Tachibana Securities.

Battered by a strong yen, Japan's No. 5 automaker is set to post its fourth straight annual net loss in the financial year to March. This month it predicted red ink of 100 billion yen, much worse than an earlier estimate of a 19 billion yen loss.

Mazda, which makes the Mazda2 subcompact and the Mazda3 compact car, is the most exposed among Japanese automakers to currency swings, building about 70 percent of its vehicles in Japan and exporting 90 percent of those last year.

"The company's fundamental outlook is still very grim and at the same time there is a huge need for cash," said Koji Endo, analyst at Advanced Research Japan.

"Even if they raise 170 billion yen, which sounds like a pretty big number, when they get done paying the bills, it could evaporate pretty quickly," he said.

To reduce its reliance on exports, Mazda plans to construct a plant in Mexico and renovate its Thai factory, and lift its overseas production ratio to 50 percent from 30 percent in four years time.

Other capital expenditure plans include the introduction of its next-generation engine and transmission technology on all its cars by around 2016. It is also considering a venture with Russian car maker Sollers to produce Mazda cars in Vladivostok, as well as production capacity increases in China.

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Mazda is taking the necessary steps to recover from bankruptcy. Because of it hemorrhaging cash, the Japanese automaker promises to offer voluntary buyout offers to many United States workers. Additional Mazda layoffs may also result, as the car maker seeks to slash operating costs.
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