Japan Airlines shares dive 81% on bankruptcy fears
Tokyo: Japan Airlines shares dived 81 percent Wednesday to just eight US cents as investors rushed for the exit ahead of an expected bankruptcy filing by the once-mighty carrier, crippled by huge debts.
JAL, Asia's biggest airline, is believed to be on the verge of seeking court protection from creditors and delisting its shares from the Tokyo Stock Exchange to make it easier to restructure its debt and slash costs.
The airline's market value now stands at just 210 million dollars, having plummeted by about 1.8 billion dollars in just two days.
While the government has pledged to do its utmost to ensure the airline keeps flying during restructuring, equity investors are expected to lose most or all of their money if the company files for bankruptcy.
JAL's share price dived by the daily limit of 30 yen for a second straight day, falling 81.08 percent to hit a record low of seven yen (eight US cents), after a 45 percent drop on Tuesday.
"The selling is unstoppable," said Hideaki Higashi, a market strategist at SMBC Friend Securities.
"The market is driving the company to go under," he said, adding that the share price could fall to just one yen.
In a fresh blow to JAL, credit rating agencies scrambled to downgrade the carrier, putting it deeper into junk bond territory.
Moody's cut JAL's long-term debt to "Ca" from "Caa1" while Standard & Poor's lowered its rating to "CC" from "CCC", meaning the airline is seen as highly vulnerable to default.
"If the company files legal proceedings, it will show a greater likelihood of defaulting on its bonds in addition to securing debt forgiveness from its relational banks," Moody's warned in a statement.
JAL's stock has plunged 95 percent over the past three months. Its highest share price since it began merging operations with small domestic carrier Japan Air Systems was 366 yen, seen in 2003.
The government is said to have tapped Kazuo Inamori, the 77-year-old founder and honorary chairman of high-tech maker Kyocera Corp., to become chief executive of JAL during the restructuring process.
Inamori was reported by Kyodo News later Wednesday to have accepted the offer to take over the airline.
The carrier's current president and chief executive Haruka Nishimatsu is expected to step down after the carrier files for bankruptcy proceedings.
JAL, which lost about 1.5 billion dollars in the six months to September, is seeking public aid in the face of mounting debts.
According to Japanese media, the company is set to receive an injection of government funds worth several hundred billion yen (several billion dollars) under a restructuring package that would see it file for bankruptcy.
At the same time JAL's creditor banks are expected to be asked to forgive loans worth several hundred billion yen.
The airline is reportedly set to slash more than 15,000 jobs and sell non-core assets such as hotels to stem massive losses.
US carriers American Airlines and Delta Air Lines are in a bidding war for a slice of the airline.
American Airlines, its Oneworld alliance partners and private equity company TPG on Tuesday lifted their proposed investment in JAL to 1.4 billion dollars, from a previous offer of 1.1 billion dollars.
Delta has offered JAL a one-billion-dollar financial package, including a 500-million-dollar equity injection, as the two airlines seek to increase their share of the lucrative Asian market.
The Japanese carrier is understood to favour a tie-up with Delta because it has a stronger trans-Pacific flight network than American Airlines.