21-Jan-2010 11:06 AM

JAL's trading partners affected by bankruptcy filing

Japan Airlines (JAL), the Japan Government and related parties reported the following developments on 20-Jan-2010, following the carrier’s bankruptcy filing on 19-Jan-2010:

  • Trading partners: JAL’s trading partners (reportedly covering 14 companies/banks/fuel suppliers, who participated in a JPY151.5 (USD1.7 billion) billion capital raising exercising in Feb-2008 will reportedly be forced to write off their contributions (Financial Times/Bloomberg/Reuters, 20-Jan-2010):
    • Development Bank of Japan: Stated it has an exposure of JPY495 billion to JAL, of which JPY20 billion is not covered by collateral.
    • Mitsui & Co: Stated it is considering how to handle its valuation of preferred shares. The company has JPY95.1 billion exposed to the airline;
    • Shinkin Central Bank: Stated it may not be able to recover or may see a delay in collecting the JPY25.5 billion owned by JAL;
    • Other JAL preferred shareholding, according to the carrier’s latest quarterly filings are: Mizuho Financial Group (JPY20 billion/USD2.9 billion), Mitsubishi UFJ Financial Group (JPY17 billion/USD2.5 billion), Mitsubish Corp (JPY15 billion/USD2.2 billion), UBS (JPY10 billion/USD1.5 billion), Sumitomo Mitsui Financial Group Inc (JPY5.5 billion/USD806 million), Idemitsu Kosan Co (JPY5 billion/USD732 million), Itochu Corp (JPY5 billion), Japan Energy Corp (JPY5 billion), Nippon Oil Corp (JPY5 billion), Sumitomo Corp (JPY5 billion), Marubeni Corp (JPY5 billion) and Cosmo Oil (JPY1 billion/USD146 million) (Bloomberg, 19-Jan-2010);
    • Solitz, a trading house that sells in-flight meals and other items, stated it would write off a JPY15 billion (USD165 million) investment in JAL. The write off amounts to slightly over 40% of Sojitz's projected operating profit for the 12 months ended 31-Mar-2010;
    • Tokyu, a rail and property group that had been one of the airline's largest common-stock investors with approximately a 3% stake, stated it sold its holding in the carrier at a JPY9 billion loss;
  • Travelling public: JAL apologised in full-page newspaper advertisements to the travelling public for causing “tremendous worries to customers” and promised that “JAL will keep flying” (AFP, 20-Jan-2010);
  • Share price: JAL’s shares dropped to another new record low of just JPY2 (USD 0.02 cents) on 20-Jan-2010 (AFP, 20-Jan-2010);
  • Outlook for related companies: Moody’s stated JAL's re-organisation could help ANA, if it picks up business from JAL passengers (MarketWatch, 20-Jan-2010). ANA is also expected to benefit from an increased allocation of landing slots at Tokyo Haneda and Narita airports and if the Japanese government reduces some of its airport-maintenance and landing fees as part of the restructuring. Moody’s added that the filing should have a limited ratings impact on Japanese corporates, financial institutions, the airline industry, and JAL's shareholders, while S&P stated losses at creditor banks are likely to be at a maximum of 10% of annual net operating profits, which would not have a substantial impact on their financial standings (Reuters, 20-Jan-2010).