JAL draws on emergency funds as bankruptcy looms

JAL draws on emergency funds as bankruptcy looms

Tokyo: Japan Airlines Corp moved a step closer to bankruptcy on Friday by drawing down $1.6 billion in emergency funding and with the Prime Minster set to decide on when the carrier will start a state-led restructuring.

Asia’s largest airline by revenues, but whose market value has collapsed to below that of budget carrier Skymark Airlines, will file for bankruptcy protection as early as Tuesday, sources have told Reuters, as part of a restructuring being crafted by a state-backed turnaround fund.

Transport minister Seiji Maehara said he would meet Prime Minister Yukio Hatoyama on Friday to set the “X-day", a term widely used by media and bankers working on JAL’s restructuring to refer to when it will file for bankruptcy.

“We are doing everything possible to reduce anxiety and reassure that the X-day will not cause any confusion," Maehara told reporters.

JAL, mired in losses and weighed down by about $16 billion in debt, applied in October to the Enterprise Turnaround Initiative Corp of Japan (ETIC), a fund that can draw on government-backed funding to bail out ailing firms.

The ETIC is expected to make an official decision next week to support the carrier with public money after it files for what could rank as Japan’s sixth-largest bankruptcy.

JAL announced on Friday it had procured ¥145 billion ($1.6 billion) in funds remaining from a 200 billion yen credit line provided by the state-owned Development Bank of Japan, indicating that it was building up emergency cash.

“We are preparing so we can make the necessary outlays when needed," JAL spokesman Satoru Tanaka said.

The Nikkei reported on Friday that Japan Airlines International, which handles domestic and overseas flights, and JAL Capital, which raises operational funds, would also file for bankruptcy and be part of the state-led bailout.

JAL declined to comment on the report.

“We expect at least the group’s three core companies - JAL, JAL International and JAL Capital - to file for bankruptcy protection under the government-led rehabilitation scheme," said Minoru Nakano, an official at bankruptcy research firm Teikoku Databank.

“It’s also possible that some other restructuring measures are announced for other smaller units at the same time."

Shares of JAL were unchanged at 8 yen, giving it a market value of about $240 million. The stock has lost about $1.8 billion this week amid growing expectations it would file for bankruptcy and be delisted from the Tokyo exchange.