Originally Posted by
diver858
So what happens to the LCC long term debt? Does it become a liability of the merged entity, paid off with stock of the new entity, ... ? Considering the makeup of the new board (American's creditors will appoint five directors, American will appoint three and US Airways four), a majority are looking to cash out now, are less concerned with such details moving forward - not a good sign.
LCC debt only gets retired with new stock if the current LCC bondholders agree to accept it as a PIK (pay in-kind). Otherwise it gets consolidated into the new merged entity, subject to any credit approval rights embedded in the debt (anyone know of it from a 10-K or 8-K reading?) Is it senior to any debt created by pre-AA debt recast as new debt in a reorganized entity? Alot depends on the steps presented in the merger plan - does AA reorg with new equity issued to replace debt, renegotiated debt ratified, etc. occur first, then the merger?