Holding pattern

20 January 2010 By John Foley Follow @johnsfoley

Japan’s flag carrier will get a clean balance sheet. If all goes to plan, the state could even double its $3.3 billion equity injection in two years. The maths are good. But the rescue means Japan will keep two international airlines. That may be one more than it can support.

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Japan Airlines began the process of restructuring its 1.2 trillion yen debts on Jan. 19 with a filing to the Tokyo District Court. As part of its turnaround plan, the nation's flag carrier would receive support from a statebacked fund, the Enterprise Turnaround Initiative Corporation, of around 900 billion yen.

JAL and its related companies had around 280 billion yen of secured debt at the time of the filing. Of the remainder, lenders would take a haircut of 83 percent, with differing degrees of recovery based on seniority. Major banks would forgive 350 billion yen of debt. As well as bank loans, JAL had 72 billion yen of bonds as of September 2009.

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