AMR CorpOTCQB:AAMRQ
Industrials : Airlines
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$5.09 0.05 (0.99%) Bid
5.10
Ask
5.11
B/A Size
300x500
High
5.13
Low
5.00
Volume
1,878,975 (Light)
As of October 16, 2013 12:27pm ET
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Judge Approves American's $785 Million Aircraft Financing Pact
12:24p ET October 16, 2013 (Dow Jones)
Judge Approves American's $785 Million Aircraft Financing Pact
By Joseph Checkler
NEW YORK--A judge on Wednesday approved up to $785 million in new aircraft financing for American Airlines parent AMR Corp. as the company continues to take advantage of historically low interest rates.
"This is a good business deal and a good opportunity given the rates available," said Judge Sean H. Lane of U.S. Bankruptcy Court in Manhattan in approving the deal. The financing is secured by 75 Boeing Co. (BA) jets of various sizes.
The exact interest rate for the financing won't be known until the bond deal is finalized, but AMR said annual interest rates on similar deals by other airlines have fallen to between 4% and 7%. In fact, AMR itself issued $1.4 billion in securities in a similar deal this past summer, with an interest rate of 4.95%.
The financing, some of the details of which were filed confidentially for competitive reasons, was supported by AMR's official committee of unsecured creditors.
AMR has continued to pursue advantageous financing as it prepares for an antitrust trial over its proposed merger with US Airways Group Inc. (LCC). The Justice Department back in August sued to block the merger, saying it would stifle competition and hurt consumers. A trial is set to begin in Washington next month.
Judge Lane last month approved the merger as part of AMR's plan to exit bankruptcy, but that plan can't become effective until the deal has regulatory approval. AMR and US Airways have said they are confident they can win the antitrust suit and merge, a deal that would create the world's largest airline.
The merger in its current form would repay AMR bondholders in full and give the company's existing shareholders at least 3.5% of the combined airline, a rare outcome in Chapter 11 cases.
In all, the proposal would give 72% of the combined airline to AMR shareholders, unsecured creditors, labor unions and some employees. The rest would go to US Air's shareholders.
AMR filed for bankruptcy protection in November 2011, citing the need to cut operational and labor costs. The company negotiated deep concessions from its main labor unions after a lengthy trial, cutting about $1 billion in annual labor costs.
AMR initially planned to exit bankruptcy as an independent airline, but the company eventually succumbed to the advances of suitor US Airways. The Justice Department suit threw both the merger and AMR's near future into uncertainty.
--Jacqueline Palank contributed to this article.
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