Japan Airlines Set for Bankruptcy as Hatoyama Abandons Bailouts

Discussion in 'Wall St. News' started by ASusilovic, Jan 10, 2010.

  1. Japan Airlines Corp. is preparing for what may be the country’s sixth-largest bankruptcy as Prime Minister Yukio Hatoyama breaks with predecessors who bailed out the carrier three times in the past nine years.

    A final decision on the future of Asia’s largest carrier, founded in 1951, may be made this week, and a bankruptcy filing will follow next week, according to three people familiar with the situation. The finance ministry and the Tokyo-based carrier’s biggest lenders all favor a court restructuring, according to people familiar with the matter.

    Hatoyama ended half a century of near-continuous rule by the Liberal Democratic Party in September on a pledge to cut “wasteful” government spending and he is set to push through a bankruptcy rather than granting unrestricted loans to a carrier with at least 1.5 trillion yen ($16 billion) of liabilities. The yield on JAL’s 2013 notes tripled last week and shares slumped to a record low in Tokyo trading on speculation the carrier would seek court protection.

    “It’s impossible that JAL would have gone bankrupt in the LDP era,” said Satoshi Yuzaki, an analyst at Takagi Securities Co. in Tokyo. “The quick decision-making by Hatoyama’s government is commendable.”

    The carrier, headed by Chief Executive Officer Haruka Nishimatsu, 62, previously won emergency loans from a state- owned bank under LDP governments following the Sept. 11 terrorist attacks in 2001, the 2003 SARS outbreak and again last year as Japan suffered its worst postwar recession.


    Good decision.
  2. Jesse Livermore commited suicide after his 4th "blowout". Maybe JAL will commit hari-kari now. :cool:
  3. m22au



    JAL Seen Closer to Bankruptcy Protection

    Momentum is gathering for Japan Airlines Corp. to file for the Japanese equivalent of Chapter 11 bankruptcy protection, even as Delta Air Lines Inc. and American Airlines remain locked in negotiations with the carrier.

    The move would mark one of the country's biggest insolvencies ever and signals that the new administration in Tokyo, led by Prime Minister Yukio Hatoyama, is set to deal with JAL—which has received three public bailouts in the last decade—swiftly and decisively.

    The state-backed turnaround body has proposed that JAL, Asia's leading carrier by revenue, undergo a modified version of a court-led rehabilitation process, according to a person familiar with the situation. The process is set to be unveiled as early as next week.

    AMR Corp.'s American Airlines and Delta Airlines are continuing discussions with JAL. Executives from American are headed to Tokyo this week to continue negotiations; the U.S. carrier has increased its offer to invest in JAL by $300 million to $1.4 billion, according to people familiar with the matter. Delta, the No. 1 carrier in the U.S., is offering $1 billion for a stake in JAL, underlining the importance of the Japanese carrier's access to lucrative Asian markets. The size of the potential stake in JAL is unclear; under Japanese law, foreign carriers can't take more than a one-third stake in JAL.

    JAL isn't expected to make a decision regarding a partner until February, according to a person familiar with the matter. The Enterprise Turnaround Initiative Corp., the state-backed body responsible for rehabilitating JAL, wants to install new management at JAL before it chooses a U.S. carrier with which it will ally.
    Read More

    * Earlier: AMR Ups Ante in JAL Fight
    * Heard: Wanted at JAL, An Iron Fist

    For a company of JAL's size, with roughly 47,000 employees, the move to file for court-led rehabilitation process would be unprecedented in Japan. Companies are rarely forced into bankruptcy proceedings as banks are often persuaded to waive debt. Moreover, the stigma associated with the process is believed to have a negative impact on consumer sentiment. The last major bankruptcy in Japan was the collapse of Mycal Corp. in 2001, a retailer that had total debt of 2.1 trillion yen, or about $23 billion at today's exchange rates. A JAL spokeswoman declined to comment on whether the airline would file for bankruptcy protection. On Sunday, a spokeswoman stressed that even if the carrier does file, its operations would continue as normal.

    Takehiko Itoh, a lawyer at Freshfields Bruckhaus Deringer LLP in Tokyo, said that establishing a framework for JAL's rehabilitation under a court-led process would take about a year.

    JAL's main banks and the Transport Ministry—a powerful Japanese bureaucracy that has had de facto control over much of JAL's decision making over the years—had opposed a court-led process, believing it would harm consumer sentiment. This opposition has thawed in recent days, however, as cabinet members scrambled to come up with a solution for the cash-strapped airline, which is quickly running out of funds.

    "The government needs to provide backup by giving official cabinet approval in order for the Enterprise Turnaround Initiative Corp. of Japan to support JAL's rehabilitation," Seiji Maehara, Japan's transport minister and a crucial figure in JAL's restructuring, said Friday night after meeting with Prime Minister Hatoyama.

    Japan's newly appointed finance minister, Naoto Kan, earlier in the week also declined to rule out bankruptcy as an option for JAL.

    JAL's main bank creditors, including Mizuho Corporate Bank, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp., had been the most vocal opponents to a court-led rehabilitation plan as they feared it would wipe out most of their loans outstanding to JAL. But they now believe that such a plan is inevitable, people familiar with the situation said.

    "We think a court led protection will affect JAL's operations, so we've been opposing it, but we may have to compromise eventually," said a senior executive at one of the bank creditors.

    Under the proposal drafted by the ETIC, loan waivers by the banks, including a debt-for-equity swap, would total more than 300 billion yen. Mizuho Corporate Bank, which is part of Mizuho Financial Group Inc., and Bank of Tokyo-Mitsubishi UFJ, part of Mitsubishi UFJ Financial Group Inc., each have about 50 billion yen in loans outstanding to JAL. Sumitomo Mitsui, a unit of Sumitomo Mitsui Financial Group Inc., has about 30 billion yen in loans outstanding.

    Tokyo: 9205




  4. I guess DAL's ATI deal didn't go through, and AMR didn't bother with their own cash infusion. Time for seppuku.
  5. m22au


    JAL opens ask-only, reports say delisting possible


    LOS ANGELES (MarketWatch) -- Shares of Japan Airlines Corp.

    came back from a three-day weekend to open ask-only Tuesday amid reports the carrier is close to bankruptcy and may be delisted from the Tokyo Stock Exchange. Dow Jones Newswires said the stock was unlikely to trade at all for the session, as sell orders vastly outnumbered buy orders, setting up the airlines to fall by its daily limit of 45% to 37 yen (40 U.S. cents), from Friday's close at 67 yen.
  6. m22au


  7. m22au



    Tokyo Bourse To Delist JAL Shares Feb 20

    TOKYO (Dow Jones)--The Tokyo Stock Exchange said Tuesday it will delist shares of Japan Airlines Corp. (9205.TO), effective Feb. 20.

    The move comes after the struggling airline, commonly known as JAL, filed for bankruptcy protection with the Tokyo District court earlier in the day, leaving behind debts totaling Y2.322 trillion on a group basis.

    The bourse said the JAL shares will go to the bourse's delisting post, but trading will continue until Feb. 19. Shares will likely be traded on a speculative basis for short-term profit gain.

    With many retail investors rushing to unload their shareholdings earlier this year on concerns about a 100% capital reduction and a share delisting, JAL shares have steadily lost ground. The issue ended flat at Y5 Monday, a steep fall from about Y200 a year earlier.

    Individual shareholders accounted for 60% of JAL's 2.73 billion outstanding common shares as of the Sept. 30 interim closing.

    By Hiroyuki Kachi, Dow Jones Newswires


    FACTBOX-JAL restructuring plan under state-backed fund
    TOKYO, Jan 19 (Reuters) - Japan Airlines Corp (9205.T) has filed for bankruptcy and will be restructured with the help of a state-backed turnaround fund, the Enterprise Turnaround Initiative Corp of Japan (ETIC).



    The ETIC said it intends to implement measures to hold shareholders accountable, including a 100 percent reduction of capital. It said the final decision on that matter, however, would be made in a forthcoming revival plan.

    The Tokyo Stock Exchange said it would delist JAL's shares on Feb. 20.


  8. zdreg


    It couldn't have happened in socialist/communist or perhaps socialist/fascist US.
  9. Good for him. That's how it should be done.

    Survival of the fittest.
  10. Lethn


    Am I the only one who wants to give that primeminister a hug?
    #10     Jan 19, 2010