Tokyo Stocks Decline on JAL Bankruptcy

Darlington Musarurwa
19 Jan, 2010
New York City

JAL Corp, once the largest airline in Asia filed bankruptcy protection with $25 billion of debt. JAL will be delisted from the TSE wiping out shareholders and tax payers will shoulder $4.5 billion of debt burden.

[R]5:00 AM New York, 7:00 PM Tokyo – JAL Corp, once the largest airline in Asia filed bankruptcy protection with $25 billion of debt. JAL will be delisted from the TSE wiping out shareholders and tax payers will shoulder $4.5 billion of debt burden.[/R]

Japan stocks fell weighed by a rising yen and JAL Corp filed bankruptcy protection.

Japan Airlines Corp filed for bankruptcy protection after four government bailouts failed to resuscitate the troubled carrier with $25 billion in debt. Once the largest airline in Asia, JAL has struggled to stay profitable in the last five years under shrinking global travel and several management missteps.

The airline will be delisted from the Tokyo Stock Exchange with all shareholding wiped out under the bankruptcy laws.

The yen appreciated to as high as 90.35 today compared with 91.04 at the close of trading yesterday.

In Tokyo trading Nikkei 225 Stock Average fell 0.8% or 90.18 to 10,764.90, and the broader Topix Index decreased 0.8% to 949.76.

In the first section of the Tokyo Stock Exchange10.1 billion shares valued at 519 billion yen were traded and in the second section 400 million shares worth 1.6 billion yen changed hands.

Of the Nikkei 225 index stocks, 63 rose, 150 dropped, and 12 were unchanged. Clarion Co. Ltd. led gainers in the index shares with a rise of 5.8% followed by Sky Perfect JSAT HD climbing 3%.

Taxpayers to Shoulder 44 billion yen for Debt Waiver

Japan Today reported that Japan Airlines Corp. and its two subsidiaries- Japan Airlines International Co and JAL Capital Co- will seek protection from creditors when it files for bankruptcy protection today under the Corporate Rehabilitation Law.

President Haruka Nishimatsu is also expected to resign today from the post and top management will soon be transferred to Kyocera Corp. founder Kazuo Inamori.

JAL restructuring will include slashing 30% of its group workforce and pruning its “overstretched subsidiaries” by the business year through March 2013.

Creditor banks and financial institutions will waive 350 billion yen in liabilities and the Enterprise Turnaround Initiative Corp of Japan will invest 300 billion yen in the airline.

ETIC will also provide guarantees on receivable for payments of fuel and other commercial transactions.

According to the report, taxpayers will be forced to shoulder 44 billion to cover part of debt forgiveness as the state-owned Development Bank of Japan’s emergency loan of 67 billion yen to JAL in June will be partially waived.

ETIC has urged creditors to waive creditors, including DBJ, to waive 83% of their unsecured loans to JAL.

Japan to Grow 1.2% this Decade

Nikkei News reported that Japan Centre for Economic Research that the country’s price -adjusted gross domestic product will grow just 1.2% a year on average in the decade.

The center forecasted that domestic capital investment will drop in the medium term as a result of companies expanding overseas production.

The report notes personal consumption will lack momentum because gains in employment and incomes will be limited.

Nikkei Movers

Japan Airlines Corporation led the decliners in the Nikkei 225 Stock Average with a loss of 16.6% followed by losses in Chiyoda Corp of 5.2%, in All Nippon Airways Co., Ltd of 4.2%, in T&D Holdings, Inc 3.9% and in The Sumitomo Trust and Banking Company, Limited 3.7%.

Clarion Co Ltd led gainers in the Nikkei 225 Stock Average with a rise of 5.7% followed by gains in SKY Perfect JSAT Holdings Inc 2.9%, in Hitachi, Ltd of 2.7% and in Bridgestone Corp of 2.0%.

Other Movers

Amiyaki Tei Co the operator of beef and chicken restaurants advanced 3.3% to ¥205,600.

Daiwa Odakyu Construction Co surged 32.0% to ¥330.00 after the contractor announced that it expects to record a ¥1,091 million extraordinary loss on the impairment of fixed assets, for the third quarter of the fiscal year ending March 2010.

Hitachi, Ltd gained 2.7% to ¥303.00 after the electronics maker was upgraded to “buy” from “neutral” at Nomura Holdings Inc.

Komatsu Wall Industry Co dropped 3.4% to ¥1,050 after the maker of room partitions announced that it has decided to merge with its wholly owned subsidiary, effective April 1.

Q.P. Corporation rose 3.6% to ¥1,037.00 after the food wholesaler was upgraded to “outperform” from “neutral” at Daiwa Securities Group Inc.

Takaoka Electric Manufacturing Co which makes fast chargers for electric cars added 2.9% to ¥312.00.

Tokyo Tatemono Co., Ltd rose 2.3% to ¥386.00 after the property developer was upgraded to “overweight” from “neutral” at JPMorgan Chase & Co.

Tokyu Land Corp rose 1.9% to ¥366.00 after the real estate company was upgraded to “overweight” from “neutral” at JPMorgan Chase & Co.

TV Asahi Corporation increased 3.1% to ¥141,200.00 after The TV broadcaster was upgraded to “buy” from “hold” at Citigroup Global Markets Japan Inc.

U-Shin Ltd surged 10.6% to ¥593.00 after the maker of auto parts announced that it has decided to repurchase 1,349,000 shares of its common stock for ¥593 per share.