JAL court-led bankruptcy not ruled out

JAL court-led bankruptcy not ruled out

Tokyo: Japan Airlines Corp’s stock slid to a new low on Wednesday after the nation’s transport minister declined to rule out a court-led bankruptcy and despite a report that private equity firm TPG may invest as much as $1.1 billion.

Japan’s transport minister Seiji Maehara told parliament that he had said that the struggling airline should not be allowed to fail or be liquidated, but he added: “I have never said a court-led bankruptcy is impossible."

Shares in JAL tumbled 7% to 94 yen after the remark, their lowest level since their 2002 re-listing although they ended the morning session at 96 yen.

The stock fall came despite a report that US private equity firm TPG was prepared to invest as much as 100 billion yen ($1.1 billion) in JAL as part of a tie-up between the struggling carrier and American Airlines.

“The best scenario for JAL is to rebuild itself with help from the government and foreign airlines," said Kotaro Toriumi, an airline analyst. “But making a fresh start after a court-led bankruptcy could be an option too," added Toriumi, who also teaches at the Faculty of Tourism at Josai International University.

The chief financial officer of American Airlines parent AMR Corp said last week that American could partner with TPG on an investment in Japan Airlines, aiming to keep it from defecting to a rival airline group.

AMR’s CFO, Thomas Horton, did not say how much the US carrier or TPG might be willing to invest.

TPG would be willing to buy up to 100 billion yen worth of common and preferred shares from JAL, the Nikkei said.

A source familiar with TPG’s thinking told Reuters after the Nikkei report that the private equity firm was still in the early stages of exploring a possible investment into JAL, and no decisions on the amount or other details had been made.

It was also unclear if TPG would be able to make such an investment.

Japan Airlines has a market value of about $3 billion, and under current laws the total stake by non-Japanese persons or entities in an airline is capped at one-third in terms of voting rights.

American Airlines has outlined a separate offer to JAL that includes a 30 billion yen investment, the Nikkei said.

American is keen to keep JAL as its partner in the Oneworld airline alliance and prevent it from joining hands with Delta Air Lines, which is holding separate talks with JAL on a capital investment and joining the rival Skyteam airline group.

JAL, headed for its fourth loss in five years, is seeking a state bailout from a government-backed turnaround fund, which is expected to take until January to decided whether the carrier is worthy of an injection of public funds.

JAL shares have lost 44% of their value compared to their mid-September peak of 178 yen.