Toyota Motor Corp. has asked Sumitomo Mitsui Banking Corp. and MUFG Bank to set up credit lines totaling 1 trillion yen, it was learned Friday. With no end in sight for the spread of the new coronavirus globally, Toyota has decided to set aside precautionary lines of credit that it can use at any time should the economic downturn drag on. It has sufficient funds at present.
Toyota requested a 500 billion yen credit line from each bank. Both banks will respond accordingly.
As a general rule, every time a company borrows funds from a bank, it has to undergo an examination of its financial condition. Under the credit line system, it can borrow the necessary amount of money within a predetermined limit without examination.
Toyota has been forced to suspend operations at its plants around the world due to a growing number of people being banned or refraining from going out. Automobile sales are also falling sharply. As of the end of December 2019, Toyota had about 5 trillion yen in cash and deposits, and has ample liquidity. However, it is difficult to foresee the impact of the spread of the new coronavirus on the company's business performance.
In the wake of the financial crisis following the 2008 collapse of Lehman Brothers Holdings Inc., financial markets were tight, making it difficult for large companies with relatively high credit ratings to issue commercial papers or corporate bonds to raise short-term funds.
There are growing concerns that corporate earnings will fall sharply in a variety of industries due to people refraining from travel and outings and a sharp drop in the number of visitors to Japan. In addition to Toyota, major banks have received a series of inquiries about financial assistance from airlines and retailers.
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