Japan Air Plunges to Record Amid Bankruptcy Reports

Dec. 30 (Bloomberg) -- Japan Airlines Corp., Asia’s biggest carrier by sales, plunged to a record in Tokyo trading after reports the carrier may enter bankruptcy proceedings led investors to sell shares on the year’s last trading day.

Japan Air fell as much as 32 percent to 60 yen and traded at 66 yen as of 11 a.m. local time. The volume of shares sold was five times the daily average for the past three months.

“Shareholders are becoming convinced that bankruptcy will be the case,” said Mitsushige Akino, who manages the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co. “They are dumping the stock. JAL’s value will be zero if it goes bankrupt.”

A state-affiliated agency charged with rescuing Japan Air met creditors yesterday to discuss a proposed bankruptcy, the Yomiuri newspaper said, without citing anyone. Japan Air owed its four main lenders, including Mitsubishi UFJ Financial Group Inc., at least 529 billion yen ($5.8 billion) as of July.

Bankruptcy is the preferred option being pursued by the agency, known as the Enterprise Turnaround Initiative Corporation, the Asahi newspaper reported yesterday, without saying where it got the information. The agency is scheduled to decide on a plan for the unprofitable airline next month.

Mizuho, Sumitomo Mitsui

Japan Air’s lenders opposed bankruptcy in yesterday’s meeting, according to the Yomiuri’s report. The Tokyo-based airline’s biggest creditors also include Mizuho Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and the state- affiliated Development Bank of Japan.

Japan Air officials were unavailable for comment due to a holiday, according to a person answering the phone at the carrier’s head office.

Takashi Takeuchi, a spokesman for Mitsubishi UFJ, was unavailable, and a spokeswoman for Sumitomo Mitsui said the company had no immediate comment. Mizuho spokesman Tomohiro Sakauchi declined to comment.

Japan’s government has pledged to keep Japan Air operating as it bails out the carrier for the fourth time since 2001. The company has posted three losses in four years and reported a net loss of 63.2 billion yen in the fiscal year ended March 31 as international travel slumped amid a global recession.

The airline secured a 100 billion yen bridge loan from a state-affiliated bank and is trying to persuade staff and retirees to accept pension cuts as it battles to avoid collapse. It has also received competing investment offers from Delta Air Lines Inc. and American Airlines.

Japan Air shares have declined 69 percent this year, the biggest drop on the Nikkei 225 Stock Average, which has risen 20 percent.