Shares of Japan Airlines Corp <9205.T> fell as much as 11 percent to renew a record low on Tuesday as investor worries mount the carrier will be restructured in bankruptcy court as part of a state bailout.

The stock slide was prompted by media reports that a state-backed turnaround fund now weighing whether to support JAL with loans and investments was considering a bankruptcy filing as one component of its restructuring plan.

Sources told Reuters on Monday the Enterprise Turnaround Initiative Corp of Japan has told creditors it may look to have JAL use Japan's Corporate Rehabilitation Law, a process similar to Chapter 11 that could wipe out the value of JAL's shares.

The ETIC has not ruled out an out-of-court restructuring in coordination with JAL's main creditors, the sources said.

No one at JAL could be immediately reached for comment.

There's a lot of concern about what might happen if JAL does end up going through bankruptcy court, what will happen to shareholders if the stock basically becomes worthless, said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

Shares of JAL were down 9 yen at 87 yen in mid-afternoon in Tokyo, after renewing a record low of 85 yen marked in late November. The stock has lost nearly 60 percent of its value this year.

The chances of bankruptcy appeared to increase last week when Finance Minister Hirohisa Fujii said the state would not back any more loans to JAL. Banks are wary of extending fresh loans to JAL unless the state insures them against losses.

A bankruptcy could complicate talks with American Airlines and Delta Air Lines , which are courting JAL with rival offers of investment to gain access to its network in Asia and closer ties on U.S.-Japan routes.

JAL, choking on 1.5 trillion yen ($16 billion) in debt and crippling pension costs, applied for assistance from the ETIC in late October. The ETIC is expected to decided whether JAL is worthy of public funds in January.

(Reporting by Nathan Layne and Elaine Lies; Editing by Chris Gallagher)

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