Analyst Recommends Japan Airlines' Bonds INVESTING MARKETPLACE By Bloomberg
Posted on: Friday, 17 February 2006, 12:00 CST
Bonds of Japan Airlines are a bargain as the carrier, Asia's largest by revenue, tries to improve safety and stem a loss of customers to All Nippon Airways, according to Lehman Brothers Japan.
The company's 310 billion, or $2.63 billion, of bonds may rise after Japan Airlines on Jan. 31 filed a government-ordered safety plan, after violations that included unauthorized takeoffs and landings. With the plan, Japan Airlines will be able to win back customers and return to profit as soon as the third quarter of 2006, Hiroshi Uchino, a credit analyst at Lehman, said Thursday.
"They had a lot of accidents," Uchino said by telephone from Tokyo. "That kind of problem can be solved. The performance has not been good, but the company will survive. The bonds offer good value at current levels."
The extra yield investors demand to buy the debt instead of like- maturity Japanese government bonds was 2.39 percentage points. The gap may narrow by half a percentage point in six months, Uchino said.
Standard & Poor's in November cut Japan Airlines' long-term debt ranking by one level to B+, four steps below investment grade, with a negative outlook meaning further reductions were possible.
Source: International Herald Tribune
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