Japan Airlines to raise ¥300bn to bolster balance sheet
JAL – Japan Airlines (JL, Tokyo Haneda) parent JAL Group plans to raise around JPY300 billion yen (USD2.73 billion) via hybrid financing, a combination of subordinated loans and bonds, to cope with the current “severe business environment,” it revealed in a statement on September 10.
“We are having to make continuous efforts to strengthen the balance sheet further and enhance its financing capability to address drastic changes in the business environment anticipated for the post-Covid-19 era, while being able to secure the necessary liquidity […] by achieving the goals specified in the medium-term management plan,” it said.
In the name of “sustainable growth,” proceeds will be allocated “to introduce the A350-1000 as our new flagship aircraft that reduce CO2 emissions significantly for international flights,” as well as to renewing the revenue management system for domestic routes, funds for investments and loans, the repayment of interest-bearing debt, and working capital.
JAL has thirteen A350-1000s on order, the ch-aviation fleets advanced module shows, along with eight A350-900s. It already operates ten -900s.
The loans will consist of two tranches, the first for JPY150 billion (USD1.37 billion) to be executed by September 30 with the first repayment due on September 30, 2026, and the entirety to be repaid by September 29, 2056. Tranche B is for up to JPY50 billion (USD455 million) to be obtained by November 30, with repayments starting on November 30, 2027, and to be paid in full by November 30, 2057. Lenders include the state-owned Development Bank of Japan as well as MUFG Bank, Mizuho Bank, and Sumitomo Mitsui Banking Corporation.
The hybrid bond issue will amount to around JPY100 billion (USD910 million) with pricing and repayment dates to be determined. Mizuho Securities will act as administrative lead manager on the issue.
Sources told local media as long ago as last October that JAL was investigating the possibility of raising around JPY300 billion in subordinated loans. Longtime rival ANA Holdings, parent company of ANA – All Nippon Airways (NH, Tokyo Haneda), managed to secure JPY400 billion (USD3.8 billion) in subordinated loans from five banks last year plus USD3.2 billion of equity.
Last month, JAL Group posted a first-quarter operating loss of JPY82.65 billion (USD753 million), though this was an improvement from a year earlier. It said at the time that it expected its cash burn rate to fall from JPY10-15 billion (USD90-137 million) a month in the first quarter to about JPY5 billion (USD45 million) in the second. It managed to raise about USD1.8 billion in a share issuance in November 2020.