Japan Airlines Credit-Default Swaps Are Too Risky, Nikko Citigroup Says

(Bloomberg) -- Investors should steer clear of
credit-default swaps tied to Japan Airlines Corp. because the
contracts are too risky given the carrier's options for raising
money, according to Nikko Citigroup Ltd.

The company, Asia's most-indebted airline, might ask its
main banks to convert loans into equity or forgive debt, which
would probably trigger payments by sellers of the contracts,
said Takayuki Atake, chief credit analyst at Nikko Citigroup in
Tokyo. The possibility the carrier can raise money without
causing a breach of its debt obligations means investors should
also avoid buying the swaps, he said.


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