Growing concerns that Japan Airlines Corp. will file for bankruptcy as part of a state bailout sent shares in the ailing carrier tumbling a further 10 percent on Friday amid uncertain signals from the government.
A state-backed turnaround fund is in negotiations with the government and creditors on a plan to support the carrier with an injection of fresh capital if it files for bankruptcy and can get debt forgiveness from its banks, sources have told Reuters.
The case for a court-led restructuring, which would dent the value of JAL's shares if not render them worthless, appeared to gather momentum on Thursday when Japan's new finance minister said he expected the fund to support JAL.
However, Transport Minister Seiji Maehara told reporters on Friday that he had not heard from a state-backed turnaround fund that a court-led bankruptcy is premise of JAL restructuring.
Shares of JAL, Asia's biggest airline by revenues, extended their slide for a third straight day, losing another 10.5 percent to 68 yen (73 U.S. cents) by the midday break, nearing to their record low of 60 yen marked on Dec. 30.
"Investors are worried that the value of JAL's stock would be diluted," said Takahiko Kishi, senior analyst at Mizuho Investors Securities.
JAL has lost more than two thirds of its value in the past year while the spread on its five-year credit default swaps, used to insure against default, have been quoted at distresses levels above 2,700 basis points.
The state-backed turnaround body, Enterprise Turnaround Initiative Corp. of Japan, is expected to make a final decision on whether to support JAL in the week starting January 18, with a filing for bankruptcy likely on the same day, sources have said.
Even as JAL flirts with bankruptcy, Delta Air Lines and American Airlines have been stepping up their efforts to court the carrier, eyeing its network to fast-growing Asian markets and a stronger foothold in Japan.
American Airlines met with JAL executives on Thursday and raised its offer of investment, to be made with private equity firm TPG, by $300 million to $1.4 billion, the Wall Street Journal reported on its Web site.
A spokesman for American Airlines declined to confirm or deny the figure.
Meanwhile, transport minister said it would be difficult to choose Delta or American as partner for JAL by the end of this month.
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