Japan Airlines triggers second Japanese credit event

Japan Airlines’ long expected bankruptcy filing took place earlier today. The move will trigger the second credit event on Japanese credit derivatives in less than a month, following the Aiful restructuring credit event that was approved by Isda’s determinations committee on 30 December.

Unlike the Aiful credit event, the default by Japan Airline’s is likely to be uncontroversial, given the company’s statement that it has filed petitions for the commencement of corporate reorganisation proceedings with the Tokyo District Court. UBS today submitted a query to the Japan credit derivatives determinations committee to confirm that the bankruptcy constitutes a credit event.

The Japan Airlines bankruptcy is by far the biggest in recent Japanese corporate history. Excluding financial companies, the biggest bankruptcies by Japanese company in the past three years has been those of property developers Joint, Pacific Holdings and Japan General Estate, according to Creditflux data. Each of those borrowers had around $2 billion of debt outstanding. By contrast, Japan Airlines is reported to have debts of JPY2.3 trillion ($25 billion). Its main lenders are the Development Bank of Japan, Japan Bank for International Cooperation, Mizuho, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui.