JAL slides to record low on bankruptcy jitters
Wednesday, 25 November 2009
TOKYO, Nov 24 (Reuters): Shares of Japan Airlines Corp slid 8.4 per cent to close at a record low Tuesday on growing investor worries the carrier could face bankruptcy as it struggles to reach an agreement on pension cuts.
The slide in shares of Asia's largest airline by revenue was also triggered by news that trading house Mitsui & Co had sold its entire holding of 11.7 million shares, raising speculation other shareholders would follow suit.
JAL President Haruka Nishimatsu asked retirees and employees Monday to accept an average 40 per cent cut to their pension payouts and warned a failure to agree on cuts could push the carrier to a court-led restructuring.
The stock closed down 8.4 per cent at 87 yen after touching 85 yen, their lowest since a relisting in 2002. More than 82 million shares changed hands, three times the daily average over the past three months.
JAL's stock has lost more than half its value this year and has tumbled 15 per cent since November 17 after Transport Minister Seiji Maehara rattled investors by saying bankruptcy was still a possibility for the airline.
"Maehara has said that bankruptcy is not entirely ruled out, and many retirees appear to disagree with the pension cuts," said Takashi Ushio, head of the investment strategy division at Marusan Securities. "GM went into bankruptcy to deal with a very similar situation."
JAL's 5-year credit default swaps, instruments used by investors to insure against the risk of a company failing, are quoted above 2,300 basis points this week, having climbed steadily from about 800 in mid-September.
The level is several times the benchmark iTraxx Japan index series 12 at 143 basis points.
The slide in shares of Asia's largest airline by revenue was also triggered by news that trading house Mitsui & Co had sold its entire holding of 11.7 million shares, raising speculation other shareholders would follow suit.
JAL President Haruka Nishimatsu asked retirees and employees Monday to accept an average 40 per cent cut to their pension payouts and warned a failure to agree on cuts could push the carrier to a court-led restructuring.
The stock closed down 8.4 per cent at 87 yen after touching 85 yen, their lowest since a relisting in 2002. More than 82 million shares changed hands, three times the daily average over the past three months.
JAL's stock has lost more than half its value this year and has tumbled 15 per cent since November 17 after Transport Minister Seiji Maehara rattled investors by saying bankruptcy was still a possibility for the airline.
"Maehara has said that bankruptcy is not entirely ruled out, and many retirees appear to disagree with the pension cuts," said Takashi Ushio, head of the investment strategy division at Marusan Securities. "GM went into bankruptcy to deal with a very similar situation."
JAL's 5-year credit default swaps, instruments used by investors to insure against the risk of a company failing, are quoted above 2,300 basis points this week, having climbed steadily from about 800 in mid-September.
The level is several times the benchmark iTraxx Japan index series 12 at 143 basis points.