AMR will offer stock to its suppliers

FA Mikey

Aug 19, 2002
From the Dallas Morning News:

AMR will offer stock to its suppliers

The move is almost unheard of among airlines, but has been tried in other industries by companies in financial trouble.

The offer is part of AMR''s strategy to stay out of bankruptcy court, an effort that got a big boost Monday when American''s three largest unions tentatively agreed to $1.62 billion in annual employee concessions. Under those deals, American employees also would get an equity stake in AMR totaling 24 percent of the company.

The suppliers who take the shares will be expected, in return, to renegotiate their deals with AMR. That could allow the company to lower its costs without spending crucial cash.

American spokesman Bruce Hicks said he couldn''t discuss any details of the plan, including how many shares the company will issue to suppliers.

Potential beneficiaries include airplane maker Boeing Co.; caterer LSG Sky Chefs Inc., based in Arlington; and Citigroup Inc., which sponsors American''s frequent-flier credit card.

The move to offer shares impressed one consultant.

It''s innovative, Michael Boyd, consultant with the Boyd Group in Evergreen, Colo., told the Associated Press. It takes cash or debt or future debt and turns it into equity. It makes all of your vendors a partner in your success ... and you''ve made vendors reticent to put you in bankruptcy.

AMR stock has soared more than 150 percent in the last two weeks – closing Friday at $3.95