Aug 14, 2020 (Nikkei) - 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.
