ANA jets at Haneda Airport in Tokyo, Japan. Picture: REUTERS/YUYA SHINO
ANA jets at Haneda Airport in Tokyo, Japan. Picture: REUTERS/YUYA SHINO

Tokyo — ANA Holdings is set to receive about ¥400bn ($3.8bn) in subordinated loans from five lenders, people with knowledge of the matter said, as the struggling Japanese airline reels from the steep drop-off in passenger traffic due to the Covid-19 pandemic.

Mitsubishi UFJ, Sumitomo Financial, Mizuho Financial, Sumitomo Mitsui Trust and the government-backed Development Bank of Japan will participate in the financing, said the people, who asked not to be identified because the information was not public. Kyodo News earlier reported on the funding plan without citing where it obtained the information.

Like in every country, airlines in Japan have been struggling amid the global coronavirus outbreak. ANA and Japan Airlines  are forecasting a drop in domestic passengers of about 50% in October. ANA was considering raising ¥200bn via a public share offering and cutting costs by selling aircraft and disposing of noncore businesses, the Nikkei newspaper reported in September.

An ANA spokesperson declined to comment, saying that the carrier was not the source of information.

Kyodo News reported that Sumitomo Financial and the Development Bank of Japan would each lend ¥130bn to ANA, while Mizuho Financial would provide ¥60bn. Mitsubishi UFJ will offer ¥50bn and Sumitomo Mitsui Trust will add ¥30bn, the news agency reported.

Subordinated loans are typically given to debt-heavy or financially weak borrowers to bolster their financial health, because credit rating companies count part of such loans as capital, helping the businesses enhance their credit status. For lenders, they are riskier than straight loans but typically carry higher interest rates.

Earlier in October, the Japanese government acknowledged the severe business environment facing airlines and said it was ready to “respond appropriately”.

The administration has taken steps to support the industry, including landing fee measures, access to funding through government financial institutions and backing a campaign aimed at promoting domestic travel, chief cabinet secretary Katsunobu Kato said on October 8.

ANA is also planning to cut wages and won’t pay winter bonuses, national broadcaster NHK reported earlier in October. Taking into account the already reduced summer bonuses, employees will see a reduction in annual wages of as much as 30%, the broadcaster said.

Bloomberg

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