TOKYO — Japan Airlines and its creditor banks are likely to agree to reduce the amount of the carrier’s debts that the banks will forgive from $4.7 billion to about $4.39 billion, sources said Saturday.
JAL is seeking to complete a state-backed corporate rehabilitation plan by the end of next month. The struggling airline hopes to present a final draft of the plan to the banks, probably on Aug. 2, and enter into final negotiations between the two sides, according to the sources.
JAL already has submitted a proposal to the banks to reduce the amount of debts to be waived. The sources said the banks likely would accept the plan, and JAL is aiming to reach a broad agreement on the issue by mid-August.
The draft plan will include restructuring measures, such as cutting JAL’s work force by about 16,000 in fiscal 2010 and retiring all large aircraft, as well as a request for a total of $3.65 billion in new loans from private-sector banks.
The banks are expected to show a certain degree of understanding toward the loan waiver and restructuring plan, but they are still cautious about extending large new loans just after accepting a request to waive existing debts. The banks will likely postpone the agreement over the new loans to the autumn and examine whether JAL’s reconstruction plan is feasible.
Because of the reduction in the loan amount to be forgiven, JAL is predicted to remain in debt at the end of fiscal 2010. Thus it is also considering asking for an additional capital contribution from the Development Bank of Japan.
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