Tokyo : Japan Airlines' state-backed turnaround will be confirmed on January 19, probably paving the way for Asia's biggest carrier to restructure under bankruptcy protection.
Enterprise Turnaround Initiative of Japan will make a final decision on its plan that day, Transport Minister Seiji Maehara told reporters in Tokyo yesterday, without elaboration. The carrier will continue operations, he reiterated.
The state-affiliate fund's programme will likely include a bankruptcy filing, according to three people familiar with the situation.
JAL sought aid from Enterprise Turnaround after posting three losses in four years and having its own turnaround plan rejected by the government.
Optimistic
"It would be very optimistic for investors to expect the government to prevent bankruptcy now," said Minoru Matsuno, president of Value Search Asset Management, a Tokyo-based investment advisory firm.
The yield on JAL's 10 billion yen ($110 million) in 2.94 per cent notes due in 2013 reached 69.7 per cent yesterday, after tripling last week, according to Japan Securities Dealers Association prices on Bloomberg. The notes yielded about 9.5 per cent a year ago.
JAL shares fell 13 per cent to seven yen at the close in Tokyo trading. The stock has slumped 90 per cent this month on concerns a bankruptcy filing will wipe out shareholders.
The Tokyo-based carrier has built up at least 1.5 trillion yen of debt, and a bankruptcy filing would likely be Japan's sixth biggest.
Delta Air Lines and American Airlines have made rival offers to invest in JAL or a restructured company to access its networks in Japan and China. Both US carriers have said that bankruptcy wouldn't deter them.
