What Does This Mean?

[Decision 2004]

American Airlines Extends Tender Offer for Selected Debt
Tuesday September 14, 5:07 pm ET


FORT WORTH, Texas, Sept. 14 /PRNewswire-FirstCall/ -- American Airlines, Inc., a wholly owned subsidiary of AMR Corporation (NYSE: AMR - News), today announced an extension of its cash purchase offer (the "Offer") relating to the 7% Alliance Airport Authority, Inc., Special Facilities Revenue Bonds, Series 1991, American Airlines, Inc., Project (the "Bonds"). The Bonds are due Dec. 1, 2011, and have a CUSIP of 01852LAB6.
The extended Expiration Date of the Offer will now be 5 p.m., New York City time, on Tuesday, Sept. 28, 2004. American now expects the Settlement Date to be on or about Oct. 1, 2004. No other changes are being made to the terms and conditions of the Offer, which was originally announced on Aug. 18, 2004, and was originally scheduled to expire at 5 p.m., New York City time, today. Withdrawal rights remain in effect through the revised Expiration Date and withdrawn Bonds may be re-tendered following the procedures in the Offer.

As of 4 p.m., New York City time, today, approximately $96.5 million principal amount of Bonds had been tendered at varying prices within the tender range of 82% to 90% of the principal amount.

Complete information regarding the terms and conditions is contained in the Offer to Purchase for Cash, which is available from the Dealer Managers and Information Agent identified below.

Selected details of the Bonds and the Offer are:
CUSIP: 01852LAB6
Coupon: 7%
Maturity: 12/01/2011
Price Range: 82% to 90% in increments of 0.25%
Revised Expiration Date: Sept. 28, 2004
Revised Expected Settlement Date: Oct. 1, 2004

The Dealer Managers for this Offer are:
Merrill Lynch & Co.
(212) 449-4914 (call collect)
(888) 654-8637 (toll-free)

Blaylock & Partners, L.P.
(415) 781-3400 (caller paid)
(866) 869-7160 (toll-free)

The Information Agent for this Offer is:
Bondholder Communications Group
(888) 385-2663 (toll-free)
E-mail: [email protected]
Website: http://www.bondcom.com/aa


This release is for informational purposes only. Bondholders are directed to review the Offer to Purchase for Cash and related materials to obtain information essential to making an informed investment decision.

About American Airlines, Inc.

American Airlines is the world's largest carrier. American, American Eagle and the AmericanConnection® regional carriers serve more than 250 cities in over 40 countries with almost 4,200 daily flights. The combined network fleet numbers more than 1,000 aircraft. American's award-winning Web site, AA.com, provides users with easy access to check and book fares, plus personalized news, information and travel offers. American Airlines is a founding member of the oneworld(tm) Alliance.

GET A GREAT LOW FARE. AND A LOT MORE AIRLINE. AMERICAN AIRLINES.

Current AMR Corp. news releases can be accessed via the Internet.
The address is http://www.aa.com

 

[FWAAA]

It means that AMR is calling the bonds early, and paying only 83% to 90% of face value to buy back the bonds. So AMR borrowed $1000 and only has to pay $830 to $900 to pay it off. Nice to see AMR begin to deal with its large debt load.

Why would AMR buy the bonds early? The 7% interest rate (while fair in 1991) is substantially above market rates today, prompting AMR to pay it off early. Last year, AMR's convertible debt sold for something like about a 4% interest rate.

Same thing you'd do if your mortgage were at 10% or your car loan was at anything above about 5%. You'd pay it off early, even if it meant borrowing the money to do it (like refinancing the house or car loan).

Nothing sinister here. Although I'm certain that someone will spin it into something ominous.

Much better than Delta - last week or two weeks ago DL failed to get agreement from some debt holders in a desperate attempt to renegotiate the terms. Dark clouds are forming over DL - very similar to those above AMR about 18 months ago.

 

[Decision 2004]

Thank you for the explanation.

Why the change in date?

 

[FWAAA]

I'm not positive, but I think that AMR is hoping that the 2 week extension will bring more of the bonds out of the woodwork and will bid at a lower price, thereby lowering AMR's total purchase price. AMR said on August 18 that it would only buy about 60% of the bonds outstanding, and would pay no more than $64.6 million for that 60%.

What's nice is that AMR is in the driver's seat on this one. It just wants to drive a better bargain with the creditors. (Sound familiar?) AMR really does want to screw more than just the employees. B)

Here's the earlier announcement:

http://www.aa.com/content/amrcorp/pressRel...18_tender.jhtml

 

[Decision 2004]

I have to admit, given your opinions, it does indeed appear AMR Mangement is headed in the right direction on this matter.

Do you think they will be able to pay for the "WE KNOW WHY" campaign with the cash saved from the bonds?

On one hand they work overtime to save some money, while at the same time blow it!

Huh, I get it now. I guess.

 

[Bob Owens]

It means that AMR is calling the bonds early, and paying only 83% to 90% of face value to buy back the bonds. So AMR borrowed $1000 and only has to pay $830 to $900 to pay it off. Nice to see AMR begin to deal with its large debt load.

Why would AMR buy the bonds early? The 7% interest rate (while fair in 1991) is substantially above market rates today, prompting AMR to pay it off early. Last year, AMR's convertible debt sold for something like about a 4% interest rate.

Same thing you'd do if your mortgage were at 10% or your car loan was at anything above about 5%. You'd pay it off early, even if it meant borrowing the money to do it (like refinancing the house or car loan).

Nothing sinister here. Although I'm certain that someone will spin it into something ominous.

Much better than Delta - last week or two weeks ago DL failed to get agreement from some debt holders in a desperate attempt to renegotiate the terms. Dark clouds are forming over DL - very similar to those above AMR about 18 months ago.

[post="180004"][/post]​

So its kind of like "prepaying" your mortgage. Nice to see that AA has the extra cash, because we sure dont!


As their debt load shrinks ours grows.

Maybe they should have fully funded the pension instead. After all, we're paying for it.

 

[FWAAA]

So its kind of like "prepaying" your mortgage. Nice to see that AA has the extra cash, because we sure dont!
As their debt load shrinks ours grows.

Maybe they should have fully funded the pension instead. After all, we're paying for it.

[post="180023"][/post]​

Didn't take long for someone to complain about it.

You'd think that AMR would be allowed to prepay a measly $64.6 million in outstanding debt, given that it added about $10 billion of debt during 2001-2003. In those 3 years, AMR lost $6.557 billion, NOT counting special charges (like the goodwill that gets you in a lather) and NOT counting the government handouts. If you count the federal bailouts, the losses total $5.333 billion.

But even though AMR has already funded this year's pension contribution of $461 million, Mr Owens complains that AMR should do something else with this $65 million.

Never mind that other airlines are NOT even funding this year's minimum required pension contributions (CO, UA and US, for starters) - according to Mr Owens, AMR is wrong for paying down less than $65 million of debt instead of depositing it in its DB pension plans.

Expect similar complaints over the next 4 years as AMR pays down some of its crushing debt load. You do realize that AMR isn't gonna give it to you until some of that debt is paid, right?

See why AMR demanded long-term concessions? With no snap-backs? It's going to take quite a few billion in profits before there's anything left for the employees.

Fortunately, I'm optimistic that there are a lot more Mr Collins at AA than there are Mr Owens. B)

 

[Bob Owens]

Didn't take long for someone to complain about it.

You'd think that AMR would be allowed to prepay a measly $64.6 million in outstanding debt, given that it added about $10 billion of debt during 2001-2003. In those 3 years, AMR lost $6.557 billion, NOT counting special charges (like the goodwill that gets you in a lather) and NOT counting the government handouts. If you count the federal bailouts, the losses total $5.333 billion.

But even though AMR has already funded this year's pension contribution of $461 million, Mr Owens complains that AMR should do something else with this $65 million.

Never mind that other airlines are NOT even funding this year's minimum required pension contributions (CO, UA and US, for starters) - according to Mr Owens, AMR is wrong for paying down less than $65 million of debt instead of depositing it in its DB pension plans.

Expect similar complaints over the next 4 years as AMR pays down some of its crushing debt load. You do realize that AMR isn't gonna give it to you until some of that debt is paid, right?

See why AMR demanded long-term concessions? With no snap-backs? It's going to take quite a few billion in profits before there's anything left for the employees.

Fortunately, I'm optimistic that there are a lot more Mr Collins at AA than there are Mr Owens. B)

[post="180132"][/post]​

Well if we sit back and wait for it there will never be anything left for the employees now will there? Perhaps you should look at the graph of mechanics pay vs CPI.

 

[FWAAA]

Well if we sit back and wait for it there will never be anything left for the employees now will there? Perhaps you should look at the graph of mechanics pay vs CPI.

[post="180141"][/post]​

I'm well acquainted with your graph and the fact that for the last 40 or 50 years or so the union representing AA's mechanics has made very little net progress. It's a shame that you and all your union brothers paid all that money in dues for all those years only to lose ground.

Some careers are highly compensated, and some aren't. The pay in some fields increases at astounding rates year after year while pay in other fields stagnates or even declines. It's too bad that at 18 years of age nobody can tell how things will turn out in their chosen field 47 years into the future.

Like I said last year, you'd be better off if the IBT represented you - then you'd be making the same high wages as those lucky guys at WN, right?

Oh, well, sure is better being a line mechanic at AA than an overhaul mechanic at UAL or AS, right? Or any employee at US, as it may not be around next spring.

 

[Bob Owens]

I'm well acquainted with your graph and the fact that for the last 40 or 50 years or so the union representing AA's mechanics has made very little net progress. It's a shame that you and all your union brothers paid all that money in dues for all those years only to lose ground.

Some careers are highly compensated, and some aren't. The pay in some fields increases at astounding rates year after year while pay in other fields stagnates or even declines. It's too bad that at 18 years of age nobody can tell how things will turn out in their chosen field 47 years into the future.

Like I said last year, you'd be better off if the IBT represented you - then you'd be making the same high wages as those lucky guys at WN, right?

Oh, well, sure is better being a line mechanic at AA than an overhaul mechanic at UAL or AS, right? Or any employee at US, as it may not be around next spring.

[post="180151"][/post]​

Well the IBT is better than the TWU. Years ago they had it right when they called the leadership of the TWU "inept". Thats what we are working on now, getting rid of the TWU and getting a real union.

As far as who is better off. Who knows? I'm sure back in 1990 the guys at Pan Am were being told how much better off they were than the guys from EAL. As it turned out the EAL guys made out better. All other things equal their lifetime earnings are much higher because they maintained a higher rate of pay and because EAL shut down sooner rather than later they started accumulating seniority before the Pan Am guys. If LCCs are the future then I cant wait for SWA!

 

[Nightwatch]

I think it's hilarious that it didn't take FWAAA long to see through Owens' rhetoric...HAHAHA..oh wait..."did you see my chart?", damn that's funny! Thanks for adding a bit of humor to my day.

 

[FWAAA]

The tender offer is complete, and AMR will pay just under 85 cents on the dollar for the bonds it is repurchasing:

American Airlines Announces Tender Offer Results

Wednesday September 29, 12:27 pm ET

FORT WORTH, Texas, Sept. 29 /PRNewswire/ -- American Airlines, Inc., a wholly owned subsidiary of AMR Corporation (NYSE: AMR - News), today announced the results of its cash purchase offer (the "Offer") relating to the 7 percent Alliance Airport Authority, Inc., Special Facilities Revenue Bonds, Series 1991, American Airlines, Inc., Project (the "Bonds"). The Bonds are due Dec. 1, 2011, and have a CUSIP of 01852LAB6.

The Offer, which was originally announced on Aug. 18, 2004, and was extended on Sept. 18, 2004, expired at 5 p.m. Eastern Time on Tuesday, Sept. 28, 2004.

Subject to the terms of the Offer, American has determined under a Modified Dutch Auction procedure that the Purchase Price is 84.75 percent of the principal amount of Bonds accepted or $4,237.50 per $5,000 principal amount of bonds accepted.

All Bonds tendered without a tender price, at a tender price below the Purchase Price or at the Purchase Price, have been accepted for purchase, subject to the terms and conditions of the Offer, without proration. All Bonds tendered at a price in excess of the Purchase Price have not been accepted for purchase.

American expects the Settlement Date to be Sept. 30, 2004, subject to change as provided in the Offer. All bonds tendered and purchased in the Offer will receive, in addition to the Purchase Price, accrued and unpaid interest up to but excluding the Settlement Date. Bonds tendered and not accepted for purchase will be returned through the DTC system as provided in the Offer.

Of the $125,745,000 principal amount of Bonds outstanding at the beginning of the tender, a total of $76,220,000 principal amount of Bonds has been accepted for purchase by American and a total of $49,525,000 principal amount of Bonds will remain outstanding following settlement.

http://biz.yahoo.com/prnews/040929/daw022_1.html

7% tax-free bonds (while about right in 1991) is just too generous these days. As everyone realizes, interest rates have fallen substantially since 1991. I'm glad that AMR now has the cash and flexibility to pay off some of its high-interest debt. Not paying this off early would look a lot like someone keeping their 10% or even 7% mortgage instead of refinancing it for 5.5% (like they could do today).

USAir couldn't even find DIP financing for its second bankruptcy, so they got permission to spend the cash that previously constituted the ATSB collateral. UAL can't find exit financing to save its life. DL is currently shopping for DIP financing just in case its pilots don't blink.

AMR's executives may in fact make a lot of mistakes, but this ain't one of them. Even blind squirrels . . .

 

[jimntx]

No one considered the fact that this is a good deal for the bondholders as well. AMR is not out of the financial woods yet, so those who elected to surrender their bonds for 85 cents on the dollar are guaranteed that amount. If AMR were to go into bk--Ch. 7 or 11--the bondholders might not get anything. Also, the bondholder has been collecting their interest all along (unless the bonds are zero coupon); so, it's not like they lost 15cents per dollar invested.

 

[TIME FOR CHANGE]

Fortunately, I'm optimistic that there are a lot more Mr Collins at AA than there are Mr Owens.

Especially during contract negotiations when Mr Collins cries the blues to Little Jim and KAPOW more concessions for the twu rank and file. After all concesssions are all ways better than bankruptcy no matter how much your pay and benefits erode. Thats what the all knowing Mr Collins says and the GODS of the Air Transport Division.

 

[twuer]

Hey just think, if amfa had been at AA we wouldn't even be having this conversatoin now would we??? AA would hardly exist!!!!!!!!!!!



Well done FWAAA!!!! You got ole Bobby right where it hurts..........in the graph!!!!!