AMR prepares to Hock the Fleet

WingNaPrayer

Veteran
Aug 20, 2002
1,742
0
EYW
Visit site
DALLAS -- AMR Corp.''s (AMR) American Airlines moved to mortgage seven airplanes -- virtually the last remaining available aircraft assets it could borrow against -- to raise $254.9 million.
The offering of notes backed by the Boeing Co.(NYSE:BA) (BA) jets is a further sign that the world''s largest carrier believes that its restructuring will allow it to escape a bankruptcy filing, according to analysts and investment bankers.
Lenders who lined up to provide more than $1 billion in bankruptcy financing last spring -- when AMR came within hours of having to seek Chapter 11 bankruptcy-court protection from creditors -- would have sought the aircraft as collateral for new lending. Now, with American believing bankruptcy is far less likely, the company is borrowing against some of its last remaining unencumbered assets that could have been offered to bankruptcy-financing lenders.
In a filing Wednesday with the Securities and Exchange Commission, American said it would offer notes backed by three Boeing 737s, one 767 and three 777s. With the offering, the airline has mortgaged virtually all of our ... eligible aircraft, American said in the filing.
American, Fort Worth, Texas, said it expected its operations in June, like in May, to generate positive cash flow. The company passed a hurdle June 30 by having more than $1 billion in unrestricted cash -- a requirement imposed by lenders.
Standard & Poor''s estimated in late June that AMR had about $1.45 billion in unrestricted cash. Cash losses have rapidly narrowed and should reach modest, positive levels later this year, the ratings agency said.
In addition, American recently received $180 million in cash from the sale of its stake in the Worldspan computer-reservation system. The aircraft borrowing, expected to close July 9, would further bolster cash reserves.
In April, American hammered out a package of contract concessions from its three labor unions that will yield, the company said, $1.8 billion in annual wage and productivity savings. In addition, structural changes such as grounding aircraft, concessions from suppliers and vendors and other cuts will raise total annual savings to $4 billion, American said.
 

LaBradford22

Advanced
May 15, 2003
206
0
Another way to put it would be, AMR prepares to raise some cash so that it can continue to operate and pay your salary.
 

desertfox

Advanced
Sep 13, 2002
210
0
----------------
On 7/3/2003 3:51:18 PM twaokc wrote:

Looks like Carl I. all over again....

----------------​
Carl started with the aircraft and kept going until the spare parts including lightbulbs were mortgaged, and he then started on the routes.
 

AAmech

Veteran
Aug 22, 2002
766
1
It could be worse. CO has hocked every airplane and now every spare part and spare engine! Right now they have no unencumbered assets.
 

FWAAA

Veteran
Jan 5, 2003
10,251
3,900
----------------
On 7/3/2003 8:40:07 PM AAmech wrote:


It could be worse.  CO has hocked every airplane and now every spare part and spare engine!  Right now  they have no unencumbered assets.

----------------​
Agreed. CO recently borrowed more money against its already encumbered spare parts and spare engines - a second mortgage, if you willl. AA still has lots of other assets against which it could borrow (just no more free and clear airplanes). Plus, AMR has yet to sell any convertible debt (like DL, CO and others have recently done).
 

JFK777

Veteran
Aug 20, 2002
694
0
They already Hocked the fleet. These investors are getting lots of collateral for these bonds. 3 777, 3 737''s and 1 767 are worth about $500 million.
 

LaBradford22

Advanced
May 15, 2003
206
0
----------------
On 7/9/2003 7:56:00 AM JFK777 wrote:

They already Hocked the fleet. These investors are getting lots of collateral for these bonds. 3 777, 3 737''s and 1 767 are worth about $500 million.

----------------​

$500 million in book value maybe. Airplanes (especially widebodies like the 777 and 767) are becoming less and less marketable these days. I would guess that, in terms of market value, those 7 airplanes are worth closer to $400 million.
 

FWAAA

Veteran
Jan 5, 2003
10,251
3,900
----------------
On 7/9/2003 9:47:02 AM LaBradford22 wrote:

----------------
On 7/9/2003 7:56:00 AM JFK777 wrote:

They already Hocked the fleet. These investors are getting lots of collateral for these bonds. 3 777, 3 737''s and 1 767 are worth about $500 million.

----------------​

$500 million in book value maybe. Airplanes (especially widebodies like the 777 and 767) are becoming less and less marketable these days. I would guess that, in terms of market value, those 7 airplanes are worth closer to $400 million.


----------------​
Exactly. The prospectus for these notes fully discusses the appraised value of the aircraft ($538 million) which is approximately book value.

Also noteworthy is that in addition to the $255 million that Citi will loan, AA is selling another $126 million of these notes to affiliates of AA - so the total cash raised will be about $370 million net of commissions and expenses.
 
Aug 20, 2002
664
50
Also noteworthy is that in addition to the $255 million that Citi will loan, AA is selling another $126 million of these notes to affiliates of AA - so the total cash raised will be about $370 million net of commissions and expenses.

----------------

What affiliates?
 

FWAAA

Veteran
Jan 5, 2003
10,251
3,900
----------------
On 7/9/2003 12:12:13 PM will fix for food wrote:

Also noteworthy is that in addition to the $255 million that Citi will loan, AA is selling another $126 million of these notes to affiliates of AA - so the total cash raised will be about $370 million net of commissions and expenses.

----------------​

What affiliates?


----------------
While I am not positive, I believe the affiliates are various funds in the AAdvantage Funds family - part of AMR Investments.

Coincidentally, they announced a new fixed income fund today:

AMR Investments Announces New American AAdvantage Fund
Friday July 11, 1:23 pm ET


FORT WORTH, Texas, July 11 /PRNewswire/ -- Fort Worth based AMR Investments proudly announces the opening of the American AAdvantage Enhanced Income Fund(SM). The Fund seeks income and capital appreciation by investing approximately 75% of its total assets in investment grade, fixed-income securities, with the remainder of the Fund''s assets invested in convertible and non-convertible debt obligations (including high yield bonds) as well as equity securities and synthetic convertibles. Managers for the Enhanced Income Fund are AMR Investments and Calamos Asset Management, Inc.

http://biz.yahoo.com/prnews/030711/daf019_1.html

I suspect this fund and others will buy the remaining notes, but I could be wrong.
 

Latest posts