The question becomes, were they really within minutes of filing without financing lined up last week? Oh My.
AMR Nears Bankruptcy Financing
Monday April 14, 3:18 pm ET
By Kathy Fieweger and Jon Herskovitz
CHICAGO/DALLAS (Reuters) - A group of four financial institutions has $1.5 billion in debtor-in-possession financing virtually complete should American Airlines and its parent AMR Corp. (NYSE:AMR - News) file for bankruptcy on Tuesday, a source familiar with the matter said.
Fort Worth, Texas-based American, the world's largest airline, is awaiting ratification results from rank-and-file union members after striking tentative concession deals from leadership two weeks ago that are aimed at saving the carrier $1.8 billion a year in labor costs.
American said it would file for bankruptcy if any of its three main unions did not ratify the concession deals. All voting results are due at noon EDT Tuesday.
The union representing pilots at American Airlines changed the deadline for voting of its 13,500 members from Monday at 5 p.m. EDT to Tuesday at 10 a.m. EDT because the group processing the vote has been overwhelmed with phone calls, a spokesman for the Allied Pilots Association said.
The potential DIP lenders are the lead bank, Citibank (NYSE:C - News), along with J.P. Morgan Chase & Co Inc. (NYSE:JPM - News), Merrill Lynch & Co Inc. (NYSE:MER - News) and CIT Group Inc. (NYSE:CIT - News), the source said.
If American files for Chapter 11 protection, Citibank will put up $750 million in a special credit-card backed DIP, similar to what Bank One Corp. (NYSE:ONE - News) did for UAL Corp.'s (NYSE:UAL - News) United Airlines last December.
The four lenders will take equal part in the remaining $750 million. The total DIP loan can be increased to $1.75 billion, if necessary, upon a special vote, the source said.
Sources familiar with the situation have told Reuters that American's management remains committed to the idea that the airline can restructure outside of bankruptcy court if workers go along, even though others are skeptical.
VOTES DUE ON TUESDAY
Union groups that represent about 74,000 of American's 100,000 member work force are voting on concession pacts that are aimed at staving off the imminent bankruptcy filing.
Voting 'no' is a vote for bankruptcy. Voting 'no' is a vote for additional job cuts, AMR Chief Executive Don Carty told employees last week at a town hall meeting. The Transport Workers Union, which represents about 34,500 ground workers and mechanics, changed its deadline for voting to 10 a.m. EDT on Tuesday from a deadline for Monday because of a technical problems in its voting process.
The Association of Professional Flight, which represents more than 26,000 flight attendants at American, has set a deadline of 11 a.m. EDT on Tuesday for its vote.
The pilots, with the most to lose (in particular, their generous pensions), seem likely to approve their contract, while the mechanics appear to be the most hostile to management's proposals, ratings agency Standard & Poor's said. Industry sources have said the vote is difficult to handicap.
A dissident group of American pilots has filed a lawsuit aimed at stopping voting for the group, arguing pilots have not received adequate information about their new contracts.
Carty has told workers that American would seek an additional $500 million in labor-cost cuts in bankruptcy and the carrier would seek several thousand additional job cuts if it is in Chapter 11 protection.
Union members have expressed anger at the deals that will cut pay for several major groups by between 15 percent to 23 percent. But union leaders said that, while the concession deals would entail painful cuts, the lack of approval would force the company into bankruptcy court, which would prompt even deeper cuts for labor.
The tentative deals include $660 million in savings from pilots, $340 million from flight attendants and $620 million from ground workers and mechanics. The carrier also obtained $180 million in savings from management and other groups.
Financing was ready then and is ready now. This report is just some wire service hacks who need to meet a deadline rehashing old information using "a source familiar" to make that information sound fresh and new, and updating the story with the present situation. This goes on all the time in what passes for journalism these days.