Thursday, February 07, 2013


AMR creditors to meet Feb. 11

May vote on US Air merger

Thu Feb 7, 2013 7:24pm EST

* US Air board, AMR board could also meet Monday-sources

* Deal may come as soon as Tuesday, but timing could slip (Adds negotiation details)

By Soyoung Kim and Karen Jacobs

NEW YORK/ATLANTA, Feb 7 (Reuters) - AMR Corp creditors plan to meet on Monday

and could vote on a potential merger agreement between the bankrupt parent of American Airlines,
and US Airways Group Inc, several people familiar with the matter said.

The two airlines are working to finalize deal terms so the board of each company could also

meet to vote on a merger on Feb. 11, the same day AMR's unsecured creditors' committee
is scheduled to convene, the people said.

If the parties meet this potential timetable - as currently envisioned but seen as aggressive - a merger

agreement could come as soon as Tuesday, the people said, asking not to be identified because
the matter is not public.

AMR filed for bankruptcy in November 2011 citing high labor costs. A combination with US Airways

would create the world's largest airline by passenger traffic and help the two carriers better compete
with rivals United Continental Holdings Inc and Delta Air Lines Inc.

Discussions are continuing and could still fall apart, they cautioned. While timing of a deal remains

fluid, there is desire to get it done before Feb. 15, when the confidentiality agreements AMR
bondholders signed are set to expire, the people familiar with the matter said.

Under terms of the non-disclosure agreements, the group of influential AMR bondholders is not

allowed to trade the airline's debt, people familiar with the matter have said.

Detailed financial information related to the merger talks is set to be publicly disclosed on Feb. 15

so that the bondholders can resume trading without possessing confidential information.
That is putting pressure on all the parties to reach a deal before then, the people have said.

US Airways, AMR and its creditors are hoping that the bondholders group will support the deal

terms before the parties announce a merger agreement, the people said.

Representatives of the creditors committee, AMR and US Airways declined to comment.

The bondholder group did not immediately respond to requests for comment.


Negotiations in recent weeks have largely come down to a few major sticking points, including how

ownership of the combined company would be split between shareholders of US Airways and
creditors of AMR, and who will run the merged airline, the sources have said.

While no final decision has been made, AMR creditors are expected to receive between 70 percent

to 75 percent of the ownership in the combined company, the people said. US Airways' formal
merger offer made in November proposed that AMR creditors own 70 percent of the equity and
shareholders of US Airways own the rest.

US Airways may also assume AMR's retiree liabilities excluding pensions, in the event of a merger,

the people said. The combined airline could take on retiree health and welfare liabilities, known as
Other Post-Employment Benefits (OPEB), that AMR has been trying to reject through the bankruptcy
process, the people said.

US Airways' original merger proposal had assumed that there would be no OPEB liability,

the people said.

US Airways Chief Executive Doug Parker is widely expected to become chief executive of the

merged airline, while AMR Chief Executive Tom Horton could become non-executive chairman
of the board for a limited time to allow for a smooth transition, the sources said.

Horton rebuffed an aggressive takeover push from US Airways early in the bankruptcy process,

saying the airline preferred to exit court protection on its own and consider a deal later. But after
several months of talks with its own creditors as well as US Airways, Horton has softened his
approach and agreed to consider all options.

A combined American-US Airways would provide the scale to match bigger rivals that are

upgrading service and expanding international routes. The merged company would have revenue
of $38.69 billion based on 2012 figures, ahead of United Continental which had revenue of
$37.15 billion last year.

The new American would have a solid presence on the important U.S. East and West coasts and on

North Atlantic routes, given American's revenue-sharing joint venture with British Airways and Iberia.

The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York,

No. 11-15463. (Reporting by Soyoung Kim in New York and Karen Jacobs in Atlanta;

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