Bankruptcy urged for JAL effort

A corporate turnaround body has proposed to the main creditor banks of Japan Airlines Corp. that the carrier's rehabilitation should focus on court-backed bankruptcy proceedings rather than an out-of-court restructuring centering on a debt waiver, sources said Tuesday.

Transport minister Seiji Maehara meanwhile held consultations with top officials of the creditor banks, including Mizuho Corporate Bank, and requested that the banks provide full financial support for the airline.

The government-backed Enterprise Turnaround Initiative Corp. of Japan is expected to finalize its JAL support plan by late January.

By then, the body will likely be focusing its efforts on a plan that would call on JAL to file for court protection under the Corporate Rehabilitation Law or other frameworks before receiving funds from the body for its turnaround efforts.

The sources said the body briefed the creditor banks on a plan focusing on bankruptcy.

The banks, however, expressed opposition because it would increase the amount of debt they would be required to waive and would also disrupt the airline's business transactions overseas, the sources said.