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ANA seeks $4.6bn in special financing from banks

DBJ, Mizuho and SMBC asked to kick in as coronavirus pandemic bites

The runway at Tokyo's Haneda airport. All Nippon Airways goes through about 100 billion yen every month to lease aircraft and make interest payments.   © Reuters

TOKYO -- ANA Holdings is in discussions for 500 billion yen ($4.6 billion) in financing from the Development Bank of Japan as well as private financial institutions, Nikkei has learned, as the airline company braces for a prolonged plunge in passenger numbers amid the coronavirus pandemic.

The Japanese airline, which has secured bank loans for the time being, is requesting DBJ, MUFG Bank, Sumitomo Mitsui Banking Corp. and Mizuho Bank to issue subordinated loans, which are considered similar to equity. ANA Holdings is looking to raise nearly 400 billion yen to 500 billion yen, though it has not settled on a figure.

With a subordinated loan, if a company faces bankruptcy, that debt has a lower priority for repayment than other debt. In addition, when a company receives a subordinated loan, its financial condition is considered to have improved. This gives the company a greater ability to borrow from banks.

ANA Holdings had secured about 1 trillion yen in loans and credit lines by June. The airline goes through about 100 billion yen every month to lease aircraft and make interest payments. It expects to have enough operating funds for about a year.

However, if passenger numbers continue to decline amid the pandemic, the airline's financial condition will deteriorate, potentially increasing costs when it issues corporate bonds and borrows from banks.

ANA Holdings hopes to get ahead of the situation with the financing it is now seeking.

Around the world, airlines are on shaky ground. In June, Aeromexico filed for bankruptcy in the United States. Thai Airways and Virgin Australia have also been forced into bankruptcy-type proceedings.

ANA Holdings has taken steps to prevent a more drastic hemorrhaging of funds. In one step, it furloughed 43,500 employees.

It intends to maintain its self-management by increasing its capital reserves before the COVID-19 situation further aggravates its financial condition.

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