Skift Take

The deal demands by the bondholder group fit within the two-week window that both labor groups and whispering executives say is likely, but there's still the chance for a last-minute dark horse deal by a recently reinvigorated executive team at American.

A group of AMR Corp. bondholders with about $1.5 billion in unsecured debt is backing a merger in bankruptcy with US Airways Group Inc. and pushing for a deal by Feb. 15, people familiar with the matter said.

The bondholders coalesced behind the idea after reviewing confidential data from AMR’s American Airlines and US Airways, said the people, who asked not to be identified because the talks are private. The promise of more cost savings and other financial benefits from a combined carrier than a stand-alone American helped sway the group, one of the people said.

While the ad hoc group doesn’t hold a seat on AMR’s unsecured creditors committee, the debt holders’ support gives US Airways an ally as it makes the case for a tie-up that would create the world’s largest airline. AMR said Jan. 3 it expected to decide in weeks to merge or stay independent.

Feb. 15 is the expiration date of non-disclosure agreements the bondholders signed with the two airlines, one of the people said. Besides giving the debt owners access to proprietary information, the accords restrict them from trading in AMR or US Airways debt, two people said.

Gerard Uzzi, an attorney at Milbank, Tweed, Hadley & McCloy LLP in New York who represents the bondholders, declined to comment when asked about the ad hoc group’s support of a merger. An AMR spokesman, Michael Trevino, also declined to comment, as did John McDonald, a US Airways spokesman.

Bondholder group

Members of the ad hoc group include MatlinPatterson Capital Management LP, JPMorgan Chase & Co., Cyrus Capital Partners LP, Pentwater Capital Management LP and Marathon Asset Management LP, according to a Dec. 13 court filing.

Based on that filing, the group’s holdings included more than $880 million of unsecured AMR notes and more than $620 million in unsecured trade claims, according to Kevin Starke, an analyst at CRT Capital Group LLC in Stamford, Connecticut.

The division of equity in a combined airline and who would run it remain unresolved in talks among the carriers and AMR creditors, the people said. The bondholders want the ownership of a combined airline to be settled first, with a decision to follow on management, one person said.

AMR has urged that creditors get 80 percent of the equity versus 20 percent for US Airways shareholders, while US Airways favors a 70 percent to 30 percent division, another person said.

The ad hoc group began organizing in May to gain more leverage in AMR’s bankruptcy, and later secured access to proprietary information as each of the carriers sought support.

The bondholders, some of which also own secured AMR debt, told American pilots in November that their support for a stand- alone carrier after bankruptcy would be conditioned on the appointment of a new board. In August, the group said it was interested in providing financing for an AMR restructuring.

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

With assistance from David McLaughlin in New York and Mary Jane Credeur in Atlanta. Editors: Ed Dufner, Kevin Miller. To contact the reporters on this story: Mary Schlangenstein in Dallas at [email protected]; Jeffrey McCracken in New York at [email protected]; Beth Jinks in New York at [email protected]. To contact the editors responsible for this story: Ed Dufner at [email protected]; Jeffrey McCracken at [email protected].


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Tags: american airlines, us airways

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