wmdwright

Today's Financial Times reports that American is expected to have trouble securing debtor in possession financing should it choose to file for bankruptcy protection under Chapter 11. If so, it will likely be unable to continue to operate and the bankruptcy could be converted from a reorganization to a liquidation. Any thoughts out there? Despite comments from those in the know- are American miles really facing the most serious threat of going away with the wind?

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H53Epilot

No, you can't have my miles!

DFWRaider

Do you have a link? I never saw anything in today's times that said AMR would have problems securing DIP financing.

aceflyer2

I believe AA will be able to secure adequate financing should it file Ch. 11.

martin33

look:

1. AA is not being FORCED into Ch 11 in the near term. IF they go soon, it will be by choice, and IF by choice, then NOT without DIP plans firmly in place. The sole reason for going sooner rather than later would be if the expected duration in court could be shorter as a result.

2. All of this recent swoon in the media seems to stem from APFA's announcements, which, last I checked, doesn't speak for AMR. If APFA is saying this, it's because they expect to need to reach a deal sooner rather than later and convince their members to go along.

NJUPINTHEAIR

I think it unlikely that AA will not be able to obtain DIP financing, and therefore, unlikely that the prospective Chap 11 filing will ever be converted to a Chap 7 liquidation.

AA's move would be to shed extra planes that it inherited with the takeover of TWA, as well as trim its labor costs.

UAL is another story, however, as that bankruptcy could turn into a 7 liquidation.

DFWRaider

According to the New York Times, AA is in much better position to obtain DIP financing than UAL was. It states that UAL had to scramble to get minimal DIP financing together, but that CitiCorp is waiting in the wings to lead AA's DIP because the AAdvantage credit card is it's largest revenue producing and widest held card, accounting for over 3% of it's revenue.

TexAAs

This seems to be nothing but a rumor mill. CitiBank has way too much tied into AA for them not to get financing.

FWAAA

On Tuesday I read an article where some doofus analyst said that AA would have problems because they waited too long to ask for concessions, they have waited too long to file for Ch 11, and they would have a hard time getting DIP financing compared to UA because AA's collateral is not as good as was UA's.

AA has almost $3 billion of unencumbered planes and a couple billion of other assets to secure its DIP loans if it comes to that. I'm guessing that AA's collateral is at least as attractive as was UA's.

Here's a quote and a link:

http://biz.yahoo.com/rb/030310/airlines_american_8.html

[This message has been edited by FWAAA (edited 03-12-2003).]

Doppy

AA is working in a financing deal right now. Its sucess is mostly contingent upon the deal closing before the war starts.

It's going to be close.

d

batman

Thats what I am hearing. The unions have been told that their concessions are not going to happen soon enough and in the event of war cash burn will be dangerously high.
It will take at a minimun 30 days to get labor concessions ratified, and by that time AMR will have very little cash reserves.

AMR will have no chioce but to declare Ch11 within days after the war starts.
They are also having difficulty arranging the complex DIP financing since they have very little collateral left other than the LHR slots. The SA is pretty much worthless and they have mortgaged just about everything else.

FWAAA

Wrong. Do you have a link or citation for your incorrect assertion?

AA has nearly $3 billion in unencumbered aircraft and a couple billion of other unencumbered assets.

http://biz.yahoo.com/rb/030310/airlines_american_8.html

AA has plenty of assets to pledge as collateral, but right now no one will loan AA money.

martin33

and rightly so, because to do so would merely put off the day of reckoning with labour..

if a deal is signed, AMR's cost structure is almost $4 billion per year lower than it used to be. It would be quite cash flow positive even at today's anemic revenue levels.

FWAAA

Exactly! If labor agrees to the drastic cuts, AA will find the financing it needs (probably headed by Citi) and will avoid Ch 11 (for now, at least).

Scion

The LHR and Narita slots that UA pledged as collateral are worthless. The bankers would never get more than a hundred million for them if they had to sell them in this market. It is a buyers, not a seller's market. What makes them even more dubious as assets is the fact that it is unclear whether or not the British or Japanese governments would allow the sale and transfer of the slots. The agreements that govern the use and disposal of the slots were changed after United acquired the slots from PanAm and AA from TWA. Technically, per the new agreements, such slot transfers are no longer allowed.

Thankfully, AMR doesn't need to offer AA's LHR slots as collateral. It can get more than it needs from pledging American Eagle as collateral. An independent regional carrier still has a lot of value in this declining market. I believe Continental realized about 1 billion dollars in equity when it spun off the much smaller Continental Express.

So, no, AA has not mortgaged everything. Eagle's value is still there to be tapped. And, it should fetch more than all of the collateral UA could offer, because unlike UA's collateral Eagle can be operated as an independent entity, and at a profit too.