TOKYO, Dec 30 (Reuters) - A government-backed turnaround fund plans to guarantee Japan Airlines' fuel payments and other commercial transactions if the carrier is restructured in bankruptcy court, the Nikkei newspaper reported on Wednesday.
Japan Airlines applied for a bailout in late October from the Enterprise Turnaround Initiative Corp of Japan (ETIC), an organisation of turnaround specialists that can draw on state-guaranteed funding to offer financial aid to ailing firms.
The ETIC is considering supporting JAL in coordination with a filing for court protection under the Corporate Rehabilitation Law, which is similar to Chapter 11 in the United States, sources familiar with the matter have told Reuters.
Bankruptcy proceedings usually lead to a sharp cut in the payment of sales receivable and other creditor claims. There is a risk JAL would not be able to make payments for fuel, parts and other transactions needed to keep flying.
The ETIC plans to keep paying for such transactions if JAL files for bankruptcy, the Nikkei said, adding that airport usage fees and insurance policy premiums would also be guaranteed.
While a bankruptcy filing has become a strong possibility, the ETIC has not ruled out a private, out-of-court restructuring in coordination with JAL's creditors, sources with knowledge of the matter have told Reuters.
The ETIC is expected to make a decision on whether to support JAL next month. The ETIC can draw on 1.6 trillion yen in state-guaranteed funding in the current fiscal year to March for loans and investments into struggling but viable firms.
JAL's main creditors are the state-owned Development Bank of Japan and the three 'megabanks': Mitsubishi UFJ Financial Group, Mizuho Financial Group, and Sumitomo Mitsui Financial Group.
((nathan.layne@thomsonreuters.com; + 813-6441-1801; Reuters Messaging: nathan.layne.reuters.com@reuters.net)) Keywords: JAL/BANKRUPTCY (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Japan Airlines applied for a bailout in late October from the Enterprise Turnaround Initiative Corp of Japan (ETIC), an organisation of turnaround specialists that can draw on state-guaranteed funding to offer financial aid to ailing firms.
The ETIC is considering supporting JAL in coordination with a filing for court protection under the Corporate Rehabilitation Law, which is similar to Chapter 11 in the United States, sources familiar with the matter have told Reuters.
Bankruptcy proceedings usually lead to a sharp cut in the payment of sales receivable and other creditor claims. There is a risk JAL would not be able to make payments for fuel, parts and other transactions needed to keep flying.
The ETIC plans to keep paying for such transactions if JAL files for bankruptcy, the Nikkei said, adding that airport usage fees and insurance policy premiums would also be guaranteed.
While a bankruptcy filing has become a strong possibility, the ETIC has not ruled out a private, out-of-court restructuring in coordination with JAL's creditors, sources with knowledge of the matter have told Reuters.
The ETIC is expected to make a decision on whether to support JAL next month. The ETIC can draw on 1.6 trillion yen in state-guaranteed funding in the current fiscal year to March for loans and investments into struggling but viable firms.
JAL's main creditors are the state-owned Development Bank of Japan and the three 'megabanks': Mitsubishi UFJ Financial Group, Mizuho Financial Group, and Sumitomo Mitsui Financial Group.
((nathan.layne@thomsonreuters.com; + 813-6441-1801; Reuters Messaging: nathan.layne.reuters.com@reuters.net)) Keywords: JAL/BANKRUPTCY (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.