Bloomberg News

AMR Says Creditors May Provide Financing for Plan

August 29, 2012

American Airlines parent AMR Corp. (AAMRQ:US) said a group of “substantial creditors” is interested in providing financing for the company’s bankruptcy reorganization.

The creditors are prepared to take part in developing AMR’s restructuring plan, the company said today in a filing in U.S. Bankruptcy Court in Manhattan. AMR filed for court protection on Nov. 29.

“The negotiations with the group are an integral part of American’s efforts to move forward to achieve the objectives of Chapter 11,” Fort Worth, Texas-based AMR said in the filing. “The commitments, if obtained, will facilitate the proposal and confirmation of a chapter 11 plan.”

The ad hoc group of bondholders does not hold a seat on American’s unsecured creditors committee, which has a voice in decisions made by the company in bankruptcy. Organizing together gives those debt owners more leverage.

“The UCC has hundreds of people it has to represent,” Hunter Keay, a Wolfe Trahan & Co. analyst, said in an interview. “Their decisions are, by simple fact, not going to represent the voice of a large number of AMR bondholders. It’s not surprising to see ad hoc committees get a little more vocal” if they don’t agree with all the panel’s actions.

Previous Case

In 2007, an ad hoc group of Delta Air Lines Inc. bondholders pressed that carrier to review a hostile US Airways Group Inc. (LCC:US) takeover bid that later failed.

The 10-member AMR creditor group includes J.P. Morgan Securities, Claren Road Asset Management LLC and King Street Capital Management LP, according to a letter filed with the court. AMR agreed to pay fees of the group’s advisers and is seeking court approval to do so.

Gerard Uzzi, an attorney for the creditor group, didn’t respond to an e-mail or phone call seeking comment.

“It is not at all unusual for large debt holders to express an interest in participating in the formulation of a plan of reorganization and to potentially provide equity or other financing as part of a plan,” said Sean Collins, an American spokesman. “These debt holders have a direct interest in ensuring that AMR emerges as a healthy company.”

Largest Holder

OppenheimerFunds Inc., the largest holder of AMR municipal debt, is part of another ad hoc bondholder group that also has hired financial and legal advisers, people familiar with the matter have said. The group wanted to assess American’s plan to emerge from bankruptcy on a stand-alone basis before examining other options, those people said in May.

Members of the ad hoc groups also have met with US Airways, which has been pressing for a merger with American. Tempe, Arizona-based US Airways has secured contract agreements with American’s unions that are conditioned on a combination of the carriers.

The case is In re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net; Mary Schlangenstein in Dallas at maryc.s@bloomberg.net.

To contact the editors responsible for this story: Stephen Farr at sfarr@bloomberg.net; Ed Dufner at edufner@bloomberg.net.


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