Gov't eyes using public funds for JAL via corporate turnaround body+

TOKYO, Oct. 23 Kyodo -
The government is studying the use of a recently launched corporate turnaround
body to inject public funds into cash-strapped Japan Airlines Corp., sources
familiar with the matter said Friday.

Earlier in the day, Prime Minister Yukio Hatoyama was given an update on the
turnaround plan for Japan's biggest airline by transport minister Seiji
Maehara, but no decision was reached on the details of financial aid measures
using public money to prop up the company.
''The fact is that 60 percent of flights in Japanese skies are operated by JAL
planes, so it would be terrible if they were unable to fly,'' Hatoyama told
reporters.
A task force appointed by Maehara has found that JAL needs to boost its capital
by 300 billion yen by tapping into public and private funds. The government is
also making arrangements to attach government guarantees to 180 billion yen in
bridge loans to be offered to JAL, to reduce the burden on creditor banks.
Although JAL is aiming to obtain basic approval for its turnaround options by
the end of this month, opinion is still divided, with some Financial Ministry
officials skeptical about offering more aid to the struggling airline, the
sources said.
''There are various options for (possible) public aid,'' Maehara, minister of
land, infrastructure, transport and tourism, said at a press conference.
''We will consult further and compile our opinions of the various menus (of
public aid options) available,'' he said.
Finance Minister Hirohisa Fujii, who also attended the morning meeting, said he
had received the interim report on JAL, calling it ''an extremely urgent
matter.''
The task force had originally favored a capital-boosting measure using public
funds under an emergency financial aid program set up by the previous Cabinet
led by the Liberal Democratic Party to support nonfinancial companies hurt by
the global economic downturn.
But JAL's main creditor banks have expressed opposition to offering fresh loans
and waiving a huge amount of debt without more commitment from the government.
Since the new corporate rescue plan requires private financial institutions to
buy shares or offer loans in addition to investment from the state-owned
Development Bank of Japan, the government has now decided to consider a more
flexible framework of injecting public funds through the Enterprise Turnaround
Initiative Corp. of Japan, the sources said.
The entity, which began operations earlier this month, has the ability to buy
debt, invest and provide loans to companies saddled with excessive liabilities
and is able to raise up to 1.6 trillion yen in government-guaranteed funds.
Time is running short with JAL expected to face a cash shortage as early as the
end of next month as it scrambles to combat plummeting travel demand from the
global economic downturn and the spread of the new influenza strain.
The company's main creditor banks, which include Mizuho Corporate Bank, Bank of
Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Banking Corp., will consider accepting
the company's request for a debt waiver of around 220 billion yen once a
framework for public aid has been ironed out, the sources.
Meanwhile, the airline will make preparations to apply for the so-called
''alternative dispute resolution'' procedure, an out-of-court arbitration
process for a corporate revival with a noncourt third-party organization acting
as an intermediary.
Using the ADR option will make it easier for JAL to receive the loans and debt
cancellation.
''In the end, the prime minister will make a decision in line with the time
schedule,'' Maehara said as the government aims to finalize the restructuring
plan by the end of November.
==Kyodo
2009-10-23 23:02:40