Japan Airlines said on Thursday it would raise up to JPY¥663 billion (USD$8.4 billion) in its initial public offering after setting the indicative price range for what will rank as the world’s second-largest IPO this year.
The airline, which is scheduled to relist its shares on the Tokyo Stock Exchange on September 19, said the price would be set between JPY¥3,500 and JPY¥3,790 after sounding out investors during a one-week book-building process that starts on Friday.
The top end of the range is equal to the preliminary reference price of JPY¥3,790 disclosed when Japan Airlines officially announced on August 3 that it would relist its stock, a move that underscores its strong recovery less than three years after it tumbled into bankruptcy with USD$25 billion in debt.
The listing will allow a state-backed fund to exit its investment in the former national flag carrier with a tidy profit. The fund, the Enterprise Turnaround Initiative Corporation of Japan (ETIC), owns 96.5 percent of JAL after injecting JPY¥350 billion worth of taxpayer funds in 2010 to keep the airline operating while it restructured.
For the business year ended in March, JAL booked a JPY¥205 billion operating profit, placing it at the top of the notoriously volatile industry. JAL is forecasting profit will drop to JPY¥150 billion in the current year.
The strong rebound in profitability followed a massive restructuring that eliminated a third of its workforce, scrapped unprofitable routes, slashed pensions and retired older, fuel-guzzling jumbo jets.
The airline also benefits from a lower interest burden stemming from debt waivers, smaller depreciation costs following a write-down of its fleet, and a USD$4.5 billion tax credit that it can use to offset corporate tax for the remainder of the decade.
Those provisions have sparked criticism from domestic rival All Nippon Airways, which has been lobbying for measures such as preferential allocation of landing slots to level what it claims is an unfair playing field.
At the top end of the range, JAL would trade at a price-to-earnings ratio of 5.3, based on its profit forecast for the current business year. That is cheaper than the industry average of nearly 16.