Japan Airlines Expecting USD$8.5 Bln From IPO

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Published: August 3, 2012

Japan Airlines said on Friday it expected to raise about USD$ 8.5 billion in an initial public offering next month, nearly doubling the investment of a state-backed fund that injected capital into the carrier following its bankruptcy in 2010.

The IPO is set to be the world’s second-largest this year after the USD$ 16 billion offering of social networker Facebook.

The Tokyo Stock Exchange on Friday gave the green light for a relisting of Japan Airlines’ (JAL) stock on September 19, less than three years after the carrier collapsed under the weight of a bloated cost base and USD$ 25 billion in debt.

In a regulatory filing, the airline gave an estimated price per share of JPY¥3,790. That would value the stake held by the state-backed fund, which is planning to sell all of its shares in the IPO, at JPY¥663 billion (USD$ 8.5 billion).

That estimate is in line with expectations. Sources with knowledge of the matter had said that the Enterprise Turnaround Initiative Corporation of Japan (ETIC) was eyeing an IPO of JPY¥600 billion to JPY¥700 billion. The fund injected JPY¥350 billion of taxpayer-backed funds into the carrier in 2010.

JAL said that it would decide on the final IPO price on September 10 after evaluating investor demand during a one-week book-building period. Three-fourths of the shares will be placed with Japanese investors and the remainder overseas.

JAL has emerged from bankruptcy as the most profitable airline in the world, after a massive restructuring that eliminated about a third of its workforce, scrapped unprofitable routes and cut pensions.

The airline has also taken advantage of a lower interest burden stemming from debt waivers, a drop in depreciation costs from a write-down of its fleet, and a tax credit that means it is unlikely to pay corporate tax for several years.

On Thursday, Japan Airlines reported a more than doubling of net income to JPY¥26.9 billion for the April-June on sales of JPY¥286.7 billion, up 12.5 percent. That builds on a strong showing in the full year ended in March when it booked an industry-leading operating profit of JPY¥205 billion.

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