AMR plan confirmation order entered, merger completion hinges on trial

By Caroline Salls

Pittsburgh, Oct. 23 - AMR Corp.'s plan of reorganization confirmation order was entered on Monday by the U.S. Bankruptcy Court for the Southern District of New York, according to an 8-K filed Wednesday with the Securities and Exchange Commission.

As previously reported, judge Sean Lane issued a written opinion confirming the company's fourth amended joint plan on Sept. 13 but denied a proposed $19.88 million severance payment to outgoing chief executive officer Thomas Horton. The U.S. Trustee's Office had objected to the payment.

The company said previously that the effective date of the plan and its Chapter 11 emergence were expected to occur simultaneously with the closing of a planned merger with U.S. Airways.

That merger has been delayed by an anti-trust lawsuit filed on Aug. 13 by the U.S. Department of Justice and several states. A trial is scheduled to begin Nov. 25.

Stock details

According to the 8-K, the ultimate parent company resulting from the merger is expected to have 1.75 billion shares of common stock and 200 million shares of preferred stock authorized on the plan effective date.

On the effective date, the company will designate a new series of convertible preferred stock from its authorized preferred stock. Up to one quarter of the shares of convertible preferred stock will be mandatorily convertible into shares of new common stock on each of the 30th, 60th, 90th and 120th day after the effective date.

In addition, holders of the convertible preferred stock may elect to convert up to $250 million of the stock during each 30-day period following the effective date.

Upon the conversion of the remaining convertible preferred stock on the 120th day after the effective date, all of the convertible preferred stock will have been converted.

The conversion price of the convertible preferred stock will vary on each conversion date, based on the volume weighted average price of the shares of new common stock on the five trading days immediately preceding each conversion date, at a 3.5% discount, subject to a cap and a floor price.

As of Sept. 30, AMR said it had $26.8 billion of total assets and $34.7 billion of consolidated debt, without giving effect to the transactions contemplated by the plan.

Creditor treatment

Treatment of creditors under the confirmed plan will include the following:

• Administrative expense claims, priority tax claims and priority non-tax claims will be paid in full in cash;

• Holders of secured claims will either be paid in full in cash, receive the proceeds of the sale of the collateral securing their claims or receive the collateral;

• Holders of general unsecured guaranteed claims will receive a number of shares of new mandatorily convertible preferred stock equal to the quotient of the claim's share of a double-dip full recovery amount divided by the per-share initial stated value;

• Holders of other general unsecured claims will receive its initial share of a number of shares of new mandatorily convertible preferred stock equal to the quotient of the total initial stated value, less the double-dip full recovery amount, divided by the per-share initial stated value, as well as its initial share of a number of shares of new common stock equal to a creditor new common stock allocation, less the number of shares of new common stock issued on conversion of all of the shares of the preferred stock, less a labor common stock allocation;

• Holders of AMR equity interests will receive a share of an initial old equity allocation and a market-based old equity allocation;

• AMR other equity interests, American Airlines equity interests and American Eagle equity interests will be reinstated for the benefit of the reorganized debtor holding those interests;

• Holders of American Airlines union claims will receive a share of new common stock in the reorganized company, with the Allied Pilots Association receiving 13.5% of the new common stock allocation, the Association of Professional Flight Attendants receiving 3% and the Transport Workers Union of America, AFL-CIO receiving 4.8%; and

• Holders of American Airlines and American Eagle convenience claims will be paid in full in cash, provided, however, that the total amount to be paid to convenience class claimants will be $25 million.

AMR Corp., the Fort Worth-based parent of American Airlines, filed for bankruptcy on Nov. 29, 2011. Its Chapter 11 case number is 11-15463.

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