AMR receives court approval to offer to purchase secured notes, EETC

By Caroline Salls

Pittsburgh, June 19 - AMR Corp. received court approval to offer to purchase pre-bankruptcy secured notes and enhanced equipment trust certificates (EETC), according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

AMR said debtor American Airlines, Inc. is a party to three separate pre-bankruptcy financing transactions secured by different aircraft pools, including a July 2009 financing transaction involving the issuance of notes secured by a group of aircraft and two EETC financings, one of which was entered into in July 2009 and the other in October 2011.

The proceeds of the sale of the 2009 and 2011 EETC were used to purchase equipment notes issued by American and secured by separate groups of the aircraft.

As of May 15, a total of $159.04 million was outstanding on the notes, the outstanding pool balance on the 2009 EETC was $425.15 million, and the outstanding pool balance on the 2011 EETC was $660.37 million.

Repayment order

AMR said the debtors had not yet completed the repayment of the notes in connection with a previous court order, choosing to delay the repayment pending affirmation of the bankruptcy court order.

However, AMR said the debtors are accruing about $6 million of interest expense under the notes each month in excess of prevailing interest rates in the EETC financing market.

In addition, the repayment of the notes under the court order can only occur before or in connection with the debtors' exit from bankruptcy.

As a result, the repayment may need to be made before the U.S. Court of Appeals for the Second Circuit court affirms the order.

AMR said the offers to purchase the notes and EETC were developed in response to these concerns.

Purchase offer terms

The purchase offers will be made under the following terms:

• Each holder of securities who validly tenders its securities on or before the expiration date to be designated by American will receive up to $1,000 in cash for each $1,000 current outstanding principal amount of notes and certificates tendered, plus interest accrued up to but not including the tender offer settlement date;

• In addition, each holder who validly tenders its securities on or before the early tender date to be designated by American will receive an early tender payment in cash of up to $65 for each $1,000 principal amount of notes or certificates tendered;

• For any class of securities for which American receives valid tenders for more than 50% of the current outstanding principal amount or pool balance, each holder who validly tenders will receive an additional consent fee of up to $5 for each $1,000 tendered;

• Each holder who validly tenders its securities will be deemed irrevocably to instruct the applicable trustee to withdraw and dismiss with prejudice any and all existing objections, complaints, adversary proceedings and appeals related to the applicable notes in connection with the AMR bankruptcy cases, including pending appeals in a U.S. Bank Trust NA suit against American Airlines; and

• American must receive tenders for at least 40% of the total current outstanding principal amount or pool balance for the securities on a combined basis.

Deutsche Bank Securities Inc. and Morgan Stanley & Co. LLC will be the dealer managers.

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

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