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The ongoing restructuring of Japan Airlines has landed legal advisory roles for Steptoe & Johnson, Hogan & Hartson, Jones Day and two of Japan’s leading law firms. Saddled with $16 billion in debt, Asia’s largest carrier is planning to file for bankruptcy protection sometime this week. The Enterprise Turnaround Initiative Corporation, a state-backed fund tasked with drafting and overseeing a restructuring plan for the struggling airline, is proposing that the Tokyo-based airline undergo a revamped court-led rehabilitation. Eiji Katayama, a name partner at Japanese firm Abe, Ikubo & Katayama in Tokyo, is advising ETIC on JAL’s restructuring efforts. Under Japanese bankruptcy law, Katayama will likely be appointed trustee for JAL, where he would perform most of the duties traditionally reserved for debtors’ counsel in the U.S. Nishimura & Asahi, the largest domestic law firm in Japan, is representing JAL. Partner Hideki Matsushima, the dean of the Japanese bankruptcy bar, is leading a team from the firm advising JAL as the airline announced plans to shed 15,600 jobs as part of its government-sponsored turnaround. (A Japanese research firm recently reported that a JAL bankruptcy could affect 1,500 small businesses.) William Karas, a regulatory and industry affairs partner with Steptoe in Washington, D.C., is serving as U.S. regulatory counsel to JAL. Steptoe has previously served as U.S. regulatory and litigation counsel to JAL, which in recent weeks has been dealing with antitrust issues here over proposed investments by American Airlines and Delta Air Lines. Tokyo-based JAL is part of the Oneworld global marketing alliance with American, which has sought to invest $1.1 billion into the ailing airline. Delta has offered $500 million in equity with another $500 million in guarantees and loans as it tries to lure JAL away from Oneworld to join its competing SkyTeam alliance. American is being advised by Jones Day antitrust and aviation partners Andrew Steinberg and J. Bruce McDonald in Washington, D.C., and M&A partner Nobutoshi Yamanouchi, the head of the firm’s Tokyo office. (American and its parent company, AAR, are longtime clients of the firm.) Delta has turned to Hogan & Hartson partner Jeffrey Shane in Washington, D.C., who specializes in aviation transactional and regulatory affairs, to advise on JAL matters. (Delta is a longtime Hogan client.) “There are investment aspects to this as well as a dispute between American and Delta,” says one lawyer with knowledge of the negotiations. Another complicating factor: U.S. airlines need to abide by restrictions against foreign investors owning more than one-third of JAL. “It’s a cumulative test in the sense that you add up all of the foreign shareholders,” the same lawyer says. “If someone holds five percent [of JAL], then the cap would be 25 percent for the rest.” For the moment, JAL’s looming bankruptcy has put that issue on hold, as ETIC has chosen not to accept foreign investment as part of a JAL restructuring plan. But various reports say that foreign investment could still be revisited at some point in the future.

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