Despite the objections of many, Horton may still get his $20 million severance while retirees see their benefits slashed or eliminated.
AMR Corp., the parent of American Airlines, won court approval to have creditors vote on its plan to exit bankruptcy by merging with US Airways Group Inc. to create the world’s largest airline.
U.S. Bankruptcy Judge Sean Lane in Manhattan today approved the disclosure statement that described AMR’s Chapter 11 plan. American, based in Fort Worth, Texas, won approval last month to proceed with the combination, which would be completed when the airline leaves court protection.
“I’m going to overrule the objections as to the disclosure statement because I disagree with the U.S. Trustee that these issues make it patently unconfirmable,” Lane said.
The U.S. Trustee, an arm of the government that oversees bankruptcies, had objected to a provision of the plan that will grant a $20 million severance package to Chief Executive Officer Tom Horton. Lane said there is adequate disclosure in the plan about the severance package and enough information to allow creditors to vote.
American filed for bankruptcy in New York in November 2011 and announced the deal with US Airways in February. US Airways CEO Doug Parker began pursuing American shortly after it entered bankruptcy, wooing creditors and unions for support.
The deal with Tempe, Arizona-based US Airways would cap a wave of consolidation in the industry and push American past United Continental Holdings Inc. and Delta Air Lines Inc. to be the world’s largest carrier.
The combined company will operate under the American Airlines name. Parker will become CEO while Horton will be chairman.
Creditors holding $1.6 billion in unsecured claims agreed to back the plan and merger, American said. US Airways shareholders will receive 28 percent of the combined company, while the remaining 72 percent will go to AMR’s unsecured creditors, labor unions, shareholders and certain employees.
AMR unsecured creditors holding $2.6 billion in claims and creditors with $6.8 billion in claims backed by aircraft will receive a full recovery, according to court papers. AMR shareholders will get a 3.5 percent stake in the combined company with the potential for additional shares.
The case is In re AMR Corp., 11-bk-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
With assistance from David McLaughlin in New York. Editors: Stephen Farr, Glenn Holdcraft. To contact the reporter on this story: Tiffany Kary in New York at [email protected]. To contact the editor responsible for this story: John Pickering at [email protected].
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