JAL To Ask Lenders For More Capital

October 26, 2010

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Japan Airlines plans to ask four major lenders and other firms for up to JPY¥50 billion (USD$613 million) in investments to bolster its capital cushion, the Nikkei business daily reported.

The airline operator, which is scheduled to get JPY¥350 billion from the state-backed Enterprise Turnaround Initiative Corporation of Japan (ETIC) and debt waivers of JPY¥520 billion from creditors, hopes to raise more to weather unexpected business downturns, the daily said.

However, the carrier is uncertain whether the banks will agree to provide the funds, especially with negotiations for additional loans to JAL still up in the air, the Nikkei said.

JAL plans to ask Development Bank of Japan, Mizuho Corporate Bank, Bank of Tokyo-Mitsubishi and Sumitomo Mitsui to take capital stakes. It also plans to approach major trading companies, insurers and travel agencies, the daily said.

The company's chairman Kazuo Inamori plans to meet bank leaders starting next week to seek investments and fresh lending, the Nikkei said.

The daily also said the airline is believed to have already begun talking to some banks behind the scenes. But the lenders are reluctant to provide more money, especially as their JAL preferred shareholdings were wiped out after its bankruptcy filing.

A business restructuring plan for the airline is expected to be approved by the end of November, the paper reported.

The airline is expected to report a group operating profit of JPY¥109.6 billion for the fiscal half ended September 30, compared with a JPY¥95.7 billion loss a year earlier, the daily said.

Also, observers had cited the risk of JAL having a capital shortage again if its earnings fall due to a slowing economy or a natural disaster, the Nikkei said.

To ensure financial stability, the carrier and the ETIC aim to boost its capitalisation to up to JPY¥400 billion, the daily added.