Japan's Integral to refinance bankrupt airline
Japanese GP Integral Corp. has agreed to refinance ailing domestic airline Skymark which filed for bankruptcy protection this week.
The Tokyo Stock Exchange-listed budget carrier blamed the weakening yen and an ongoing legal dispute with aircraft manufacturer Airbus for its financial woes. An exchange filing revealed that Skymark has racked up debts totalling JPY71 billion ($603 million).
The carrier will be delisted in March. The company's president, Shinichi Nishikubo, will also step down to be replaced by current CFO Masakazu Arimori. Integral will help finance the carrier's restructuring, pending approval from the Tokyo District Court. The amount Integral will invest was not disclosed.
According to Bloomberg, shares in the company went untraded today after sell offers outnumbered bids by 500 to 1.
Skymark was set up in 1996 and is the last remaining Japanese airline to operate independently of either JAL or ANA. The company had previously done well, mostly due to its ability to undercut industry incumbents by employing a fleet of smaller fuel-efficient jets and offering a stripped-down in-flight service.
Its move to expand internationally and compete with bigger rivals, however, proved to be its undoing. In 2011, Skymark ordered six Airbus A380s for JPY191.5 billion - more than twice its annual revenue for the 2011 financial year.
However, 2012 saw the arrival of other budget competitors such as Peach Aviation - an ANA-controlled joint venture - and Jetstar, which is controlled by JAL and Australia's Quantas.
The weakening yen further exacerbated the situation and Skymark - which recorded its first loss in 2013 - struggled to meet the down payment for the new A380 fleet. By July, Airbus revoked its $2 billion contract and filed a lawsuit in December over the unpaid deposits.
Integral typically focuses on buyout and PIPE deals. It is currently investing out of its second fund, which reached a final close in November of last year at JPY44.2 billion. The fund counts the state-backed Organization for Small & Medium Enterprises and Regional Innovation (SMRJ) among its LPs.
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