Creditor banks agree to JAL bankruptcy proceedings

January 14th, 2010 - 6:16 pm ICT by IANS  

Tokyo, Jan 14 (DPA) The creditor banks of indebted Japan Airlines Corp (JAL) have abandoned their opposition to state-led bankruptcy proceedings.
Mizuho Corporate Bank, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking as well as the Development Bank of Japan had officially accepted the court-led restructuring plan, the Japanese news agency Kyodo reported Thursday.

The state-owned Enterprise Turnaround Initiative Corp (ETIC), which is tasked with rescuing the airline, could now put forward a restructuring plan for JAL, planned for Tuesday.

An application by the airline for protection from creditors could be made the same day.

It is one of the largest bankruptcies in Japanese corporate history.

The creditor banks had previously rejected bankruptcy in favour of a restructuring outside the courts because of worries it would reduce their own shareholdings and would cause JAL to lose even more passengers.

Now they have agreed to the restructuring planned by the ETIC in the belief that only the state restructuring company could provide loans of the required size and that, otherwise, JAL would collapse, media reports said.

Kyodo reported that the three largest private creditor banks wanted to agree to a comprehensive cancellation of debt. The report said they along with regional banks could be asked to agree to cancel debt of up to 350 billion yen ($3.8 billion) in a restructuring plan.

The ETIC has estimated JAL’s liabilities at 860 billion yen in excess of its assets after suffering losses in four of the past five years. In the first half of the current fiscal year, which ends March 31, JAL lost 131.2 billion yen.

It has been apparent for months that the former state-owned airline could not survive without a radical overhaul.

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