ID :
98795
Fri, 01/08/2010 - 07:47
Auther :
Shortlink :
https://www.oananews.org//node/98795
The shortlink copeid
Private creditor banks compile out-of-court restructuring plan for JAL+
TOKYO, Jan. 7 Kyodo - Three private creditor banks have compiled their own out-of-court restructuring plan to turn around Japan Airlines Corp. in hopes of averting bankruptcy proceedings being mulled by a government-backed body, sources close to the matter said Thursday.
Meanwhile, American Airlines Inc., jointly with a U.S. investment fund, is
gearing up to offer up to $1.4 billion (around 130 billion yen) to invest in
JAL, $300 million more than its previous plan, according to sources familiar
with the plan.
The proposal by Mizuho Corporate Bank, the Bank of Tokyo-Mitsubishi UFJ and
Sumitomo Mitsui Banking Corp. will hold shareholders accountable by seeking
capital reduction, which is rare for an out-of-court restructuring.
The banks have already submitted the plan to the transport ministry and the
Enterprise Turnaround Initiative Corp. of Japan, tasked with JAL's
rehabilitation. They also plan to extend over 300 billion yen in financial
support through debt waiver and debt-to-equity conversion, the sources said.
ETIC, which is expected to unveil a bailout package later this month, is
currently mulling a turnaround plan that would entail JAL applying for
bankruptcy protection under the Corporate Rehabilitation Law after obtaining
approval from its key creditor banks.
People familiar with the matter have earlier said the entity plans to create a
credit line of around 400 billion yen and invest about 300 billion yen in
Japan's top carrier.
But the three private banks have opposed the bankruptcy option, citing credit
turmoil the move may cause.
Under their plan, the banks envision winning support from ETIC and the
government during this month and holding an extraordinary shareholders meeting
at the end of March to vote on a special resolution. ETIC would then follow
suit with an investment into JAL, the sources said.
But if the special resolution is voted down, the banks will abandon
out-of-court restructuring and pursue bankruptcy proceedings under the
Corporate Rehabilitation Law, they said.
As of the end of September, the three banks held a total of about 200 billion
yen in outstanding loans to JAL and are the largest creditors following
state-owned Development Bank of Japan. The turnaround body is seeking to have
the banks waive about 300 billion yen in debt.
Under a court-backed rehabilitation process, banks would face the risk of
incurring losses from holdings in JAL's preferred shares while the airline
could see a loss in passengers and interruption to its operations.
Meanwhile, informed sources separately said ETIC has told JAL that it will
likely have its corporate pension fund dissolved if the company fails to win
approval from current employees and pension recipients to carry out drastic
cuts in their benefits.
If the carrier can obtain the necessary two-thirds approval to implement the
pension reform, the entity is planning to stick with the current rate of
pension cuts even if JAL undergoes a court-backed rehabilitation process.
JAL President Haruka Nishimatsu sent out a letter to recipients dated Tuesday,
making a final plea for their consent to pension cuts as prospects for reaching
the key threshold became murky after the spread of bankruptcy rumors aroused
uncertainties and skepticism among the recipients.
JAL officials hope to clinch the necessary approval by its Jan. 12 deadline
since the dissolution of the pension fund and government moves for special
legislation to enable mandatory pension reduction will further erode the
benefits for the recipients.
Earlier in the day, Delta Air Lines President Edward Bastian said the U.S.
carrier and its SkyTeam alliance partners will keep their financial package on
the table and support JAL even if it files for court-backed bankruptcy
proceedings.
''Our objective here is to invest in the restructured company, whichever legal
form that restructuring takes,'' Bastian said at a press conference in Tokyo.
''And if the stakeholders conclude and decide that bankruptcy is the best
option for JAL's long-term recovery, we'll support that.''
Comments from JAL and government officials in recent weeks have suggested that
JAL is leaning toward switching to the Delta-led SkyTeam, which has offered a
$1.02 billion package including a direct investment of $500 million, as its
marketing alliance partner.
The battle to enter a closer alliance with the cash-strapped Japanese carrier
is entering a final phase with American Airlines, a unit of AMR Corp., also
scrambling to avoid the defection of its key Japanese partner from the oneworld
grouping, which includes British Airways Plc and Australia's Qantas Airways
Ltd.
Business Travel Coalition, a U.S. corporate travel lobby group, expressed
opposition on Wednesday to a tie-up between Delta Air Lines and Japan Airlines,
saying the combined share of the two companies in the transpacific market would
rise to an extent detrimental to sound competition. The two carriers operate
the largest networks in their own countries.
==Kyodo
Meanwhile, American Airlines Inc., jointly with a U.S. investment fund, is
gearing up to offer up to $1.4 billion (around 130 billion yen) to invest in
JAL, $300 million more than its previous plan, according to sources familiar
with the plan.
The proposal by Mizuho Corporate Bank, the Bank of Tokyo-Mitsubishi UFJ and
Sumitomo Mitsui Banking Corp. will hold shareholders accountable by seeking
capital reduction, which is rare for an out-of-court restructuring.
The banks have already submitted the plan to the transport ministry and the
Enterprise Turnaround Initiative Corp. of Japan, tasked with JAL's
rehabilitation. They also plan to extend over 300 billion yen in financial
support through debt waiver and debt-to-equity conversion, the sources said.
ETIC, which is expected to unveil a bailout package later this month, is
currently mulling a turnaround plan that would entail JAL applying for
bankruptcy protection under the Corporate Rehabilitation Law after obtaining
approval from its key creditor banks.
People familiar with the matter have earlier said the entity plans to create a
credit line of around 400 billion yen and invest about 300 billion yen in
Japan's top carrier.
But the three private banks have opposed the bankruptcy option, citing credit
turmoil the move may cause.
Under their plan, the banks envision winning support from ETIC and the
government during this month and holding an extraordinary shareholders meeting
at the end of March to vote on a special resolution. ETIC would then follow
suit with an investment into JAL, the sources said.
But if the special resolution is voted down, the banks will abandon
out-of-court restructuring and pursue bankruptcy proceedings under the
Corporate Rehabilitation Law, they said.
As of the end of September, the three banks held a total of about 200 billion
yen in outstanding loans to JAL and are the largest creditors following
state-owned Development Bank of Japan. The turnaround body is seeking to have
the banks waive about 300 billion yen in debt.
Under a court-backed rehabilitation process, banks would face the risk of
incurring losses from holdings in JAL's preferred shares while the airline
could see a loss in passengers and interruption to its operations.
Meanwhile, informed sources separately said ETIC has told JAL that it will
likely have its corporate pension fund dissolved if the company fails to win
approval from current employees and pension recipients to carry out drastic
cuts in their benefits.
If the carrier can obtain the necessary two-thirds approval to implement the
pension reform, the entity is planning to stick with the current rate of
pension cuts even if JAL undergoes a court-backed rehabilitation process.
JAL President Haruka Nishimatsu sent out a letter to recipients dated Tuesday,
making a final plea for their consent to pension cuts as prospects for reaching
the key threshold became murky after the spread of bankruptcy rumors aroused
uncertainties and skepticism among the recipients.
JAL officials hope to clinch the necessary approval by its Jan. 12 deadline
since the dissolution of the pension fund and government moves for special
legislation to enable mandatory pension reduction will further erode the
benefits for the recipients.
Earlier in the day, Delta Air Lines President Edward Bastian said the U.S.
carrier and its SkyTeam alliance partners will keep their financial package on
the table and support JAL even if it files for court-backed bankruptcy
proceedings.
''Our objective here is to invest in the restructured company, whichever legal
form that restructuring takes,'' Bastian said at a press conference in Tokyo.
''And if the stakeholders conclude and decide that bankruptcy is the best
option for JAL's long-term recovery, we'll support that.''
Comments from JAL and government officials in recent weeks have suggested that
JAL is leaning toward switching to the Delta-led SkyTeam, which has offered a
$1.02 billion package including a direct investment of $500 million, as its
marketing alliance partner.
The battle to enter a closer alliance with the cash-strapped Japanese carrier
is entering a final phase with American Airlines, a unit of AMR Corp., also
scrambling to avoid the defection of its key Japanese partner from the oneworld
grouping, which includes British Airways Plc and Australia's Qantas Airways
Ltd.
Business Travel Coalition, a U.S. corporate travel lobby group, expressed
opposition on Wednesday to a tie-up between Delta Air Lines and Japan Airlines,
saying the combined share of the two companies in the transpacific market would
rise to an extent detrimental to sound competition. The two carriers operate
the largest networks in their own countries.
==Kyodo
