AMR Corp. bondholder group said to favor US Airways merger

BY Bloomberg News
Wednesday, January 30, 2013
1/30/13 at 3:44 AM

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By Mary Schlangenstein, Jeffrey McCracken and Beth Jinks

A group of AMR Corp. bondholders with about $1.5 billion in unsecured debt is backing a merger in bankruptcy with US Airways Group Inc. and pushing for a deal by Feb. 15, people familiar with the matter said.

The bondholders coalesced behind the idea after reviewing confidential data from AMR's American Airlines and US Airways, said the people, who asked not to be identified because the talks are private. The promise of more cost savings and other financial benefits from a combined carrier than a stand-alone American helped sway the group, one of the people said.

The ad hoc group doesn't hold a seat on AMR's unsecured creditors committee, but the debt holders' support gives US Airways an ally as it makes the case for a tie-up that would create the world's largest airline. AMR said Jan. 3 it expected to decide in weeks to merge or stay independent.

Feb. 15 is the expiration date of non-disclosure agreements the bondholders signed with the two airlines, one of the people said. Besides giving the debt owners access to proprietary information, the accords restrict them from trading in AMR or US Airways debt, two people said.

Gerard Uzzi, an attorney at Milbank, Tweed, Hadley & McCloy LLP in New York who represents the bondholders, declined to comment. An AMR spokesman, Michael Trevino, also declined to comment, as did John McDonald, a US Airways spokesman.

Members of the ad hoc group include MatlinPatterson Capital Management LP, JPMorgan Chase & Co., Cyrus Capital Partners LP, Pentwater Capital Management LP and Marathon Asset Management LP, according to a Dec. 13 court filing.

Based on that filing, the group's holdings included more than $880 million of unsecured AMR notes and more than $620 million in unsecured trade claims, according to Kevin Starke, an analyst at CRT Capital Group LLC in Stamford, Conn.

The division of equity in a combined airline and who would run it remain unresolved in talks among the carriers and AMR creditors, the people said. The bondholders want the ownership of a combined airline to be settled first, with a decision to follow on management, one person said.

AMR has urged that creditors get 80 percent of the equity versus 20 percent for US Airways shareholders, but US Airways favors a 70 percent to 30 percent division, another person said. American is the third-biggest U.S. airline, and US Airways is No. 5.

US Airways CEO Doug Parker has pushed for a merger since January 2012. AMR CEO Tom Horton agreed to consider merger options in restructuring after saying the airline preferred to exit court protection and then weigh consolidation.

Speculation that Parker would succeed has more than tripled US Airways shares since the day before AMR's Chapter 11 filing on Nov. 28, 2011, topping the 26 percent gain for the Standard & Poor's 500 Index.

The ad hoc group began organizing in May to gain more leverage in AMR's bankruptcy, and later secured access to proprietary information as each of the carriers sought support.

Original Print Headline: Group pushes AA-US Airways merger

Horton in talks about role, report says

DALLAS (AP) - The CEO of American Airlines parent AMR Corp. is in talks about becoming chairman if his company merges with US Airways.

That's according to a report in The Wall Street Journal, and it adds to indications that a deal between the two airlines could be close.

The Journal reported Tuesday that people familiar with the matter say AMR Chairman and CEO Thomas Horton's future in a merged airline is still in flux, however. He could wind up in some other role such as vice chairman, if there is a merger.

US Airways Group Inc. has proposed that its chairman and CEO, Doug Parker, run the combined company, which would rival United as the world's biggest airline.

AMR and US Airways are declining to comment.

Associated Images:

A US Airways jet (left) taxis past an American Airlines plane at Reagan National Airport in Washington, D.C. A group of bondholders at bankrupt American wants the two carriers to merge and is pushing for a deal by Feb. 15, sources say. Bloomberg file