Bankruptcy With $16 Billion In Debt
*Source: DTN News / Int'l Media
(NSI News Source Info) TOKYO, Japan - January 13, 2010: Japan Airlines (9205.T) will likely file for bankruptcy protection next week, sources with knowledge of the matter said, in what would be one of the largest corporate failures in Japanese history.
Here are some facts about the likely procedure and restructuring, and a list of Japan's biggest bankruptcies.
* A state-backed fund, the Enterprise Turnaround Initiative Corp of Japan (ETIC), is eyeing Jan. 19 to 22 for Japan Airlines to file for bankruptcy. The ETIC would then officially announce plans to support the carrier as its sponsor in the proceedings, including plans for a capital injection of about 300 billion yen.
* JAL is expected to file for protection from creditors under the Corporate Rehabilitation Law, one of two major legal proceedings that allow for a company to continue its operations and pursue a revival, similar to Chapter 11 in the United States.
In this bankruptcy procedure, management is normally sacked and a court-appointed trustee is given the power to administer the company's assets and its business. This is one of the key differences compared with the Civil Rehabilitation Law, which allows current management to retain authority.
* JAL's filing will be "pre-packaged", as the debt waiver and sponsor investor will be decided beforehand, allowing for a smoother rehabilitation process. The ETIC is asking banks to forgive about 350 billion yen in debt. JAL will likely be the first company in Japan to secure a debt waiver before the bankruptcy filing is made.
* Bankruptcy is a well-worn route for overseas airlines. Delta Air Lines (DAL.N), United Airlines (UAUA.O) and US Airways (LCC.N) are among the U.S. carriers to have been through and emerged from bankruptcy in recent years.
JAL received emergency loans from the state-owned Development Bank of Japan in 2001 in the wake of the Sept. 11 terrorist attacks in the United States, in 2003 after the spread of SARS, and again last year. But it has never filed for bankruptcy.
* JAL was saddled with about 1.5 trillion yen ($16.3 billion) in total liabilities as of the end of September. At that level of debt, its bankruptcy would be the sixth largest in Japan's history. Here is a list of Japan's five largest bankruptcies:
COMPANY WHEN DEBT 1. Kyoei Life Insurance OCT 2000 4,529,693 2. Lehman Brothers Japan SEPT 2008 3,431,400 3. Chiyoda Mutual Life Insurance OCT 2000 2,936,600 4. Japan Leasing SEPT 1998 2,180,300 5. Mycal SEPT 2001 1,600,000 NOTE: *Value is in millions of yen.
SOURCE: Tokyo Shoko Research (Compiled by Junko Fujita)
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