JAL’s credit rating cut to Selective Default by S&P


TOKYO – Standard & Poor’s has cut Japan Airlines Corp. corporate credit rating to a default level, saying it saw the airline’s agreement with creditors to suspend some repayments as part of its debt restructuring efforts as default.

S&P cut long term corporate credit ratings for JAL and its fully owned subsidiary Japan Airlines International to SD from CCC, the agency said in a statement on Wednesday.

The SD means a company has failed to pay financial obligations, while CCC means a company is dependent on favorable conditions to meet its financial commitments.

JAL, Asia’s largest airline by revenue, last month applied for debt restructuring plan which would allow the airline to suspend payments to creditors and make it easier to secure bridge loans.

The scheme was recently introduced in Japan and is called “Alternative Dispute Resolution,” under which a third party would mediate between JAL and its creditors, allowing for the temporary suspension of loan payments.

S&P said a company’s suspension of debt payments under the ADR procedures may not legally constitute a default. However S&P views JAL’s case as a default based on its own criteria, adding there was a failure to pay on Nov. 30.

S&P said it would review the ratings following analysis of the companies’ subsequent debt payment capabilities.

S&P kept its senior unsecured debt ratings on JAL and the subsidiary at CCC and kept the ratings on possible review with developing implications.