Wednesday November 18, 07:23 AM
UPDATE 4-JAL shares slide; court-led bankruptcy not ruled out
By Nobuhiro Kubo
TOKYO, Nov 18 (Reuters) - Japan's transport minister declined to rule out a court-led bankruptcy for Japan Airlines, sending the struggling carrier's stock to a record low, even as U.S. carriers lined up with
offers of investment.
Delta Airlines said it and its partners in the SkyTeam airline alliance were ready to offer a total aid package of $1 billion, including a $500 million capital investment from SkyTeam members, to get it to defect from the rival Oneworld alliance.
Delta's offer of support followed an announcement last week by American Airlines, JAL (Berlin: JAY.BE - news) 's partner in Oneworld, that U.S. private equity firm TPG was prepared to partner with it in an investment in JAL.
The Nikkei newspaper reported earlier on Wednesday that TPG was ready to invest as much as 100 billion yen.
JAL's stock closed down 3.9 percent at 98 yen after sliding as low as 94 yen, their lowest level since relisting in 2002.
Investors sold after the nation's transport minister said that he would not rule out a court-led bankruptcy for JAL, which is seeking a bailout from a government-backed turnaround fund.
'I have never said a court-led bankruptcy is impossible,' Seiji Maehara told parliament, explaining that in previous remarks he has said the airline should not be allowed to fail or liquidated but had not ruled out a court-led restructuring.
In addition to $500 million in capital from SkyTeam members, Delta said its aid package would include $300 million in guarantees on any short-term revenue loss and $200 million in asset-backed financing from Delta.
The chief financial officer of American Airlines parent AMR Corp (NYSE: AMR - news) said last week that American could partner with TPG on an investment in Japan Airlines, but had not disclosed how much it might be willing to invest.
'The best scenario for JAL is to rebuild itself with help from the government and foreign airlines,' said Kotaro Toriumi, an airline analyst. 'But making a fresh start after a court-led bankruptcy could be an option too,' added Toriumi, who also teaches at the Faculty of Tourism at Josai International University.
TPG would be willing to buy up to 100 billion yen worth of common and preferred shares from JAL, the Nikkei (news) said.
A source familiar with TPG's thinking told Reuters after the Nikkei report that the private equity firm was still in the early stages of exploring a possible investment in JAL, and no decisions on the amount or other details had been made.
It was also unclear if TPG would be able to make such an investment.
Japan Airlines has a market value of about $3 billion, and under current laws the total stake of non-Japanese persons or entities in an airline is capped at one-third in terms of voting rights.
American Airlines has outlined a separate offer to JAL that includes a 30 billion yen investment, the Nikkei said.
American is keen to keep JAL as its partner in the Oneworld alliance and prevent it from joining hands with Delta Air Lines , which is holding separate talks with JAL on a capital investment and joining the rival Skyteam airline group.
JAL, headed for its fourth loss in five years, is seeking a fund injection from the Enterprise Turnaround Initiative Corporation of Japan, which is expected to take until January to decide whether the carrier is worthy of state aid.
(Reporting by Nobuhiro Kubo, Nathan Layne and Masayuki Kitano; Editing by Hugh Lawson)
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