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.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Joseph Checkler at joseph.checkler@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires