AMR files reorganization plan

Bankrupt AMR Corp. on Monday filed a reorganization plan detailing payments to creditors and its merger with US Airways Group Inc.

The parent of American Airlines requested a May 30 disclosure statement hearing, but Judge Sean H. Lane of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan has not yet set a date.

Under the plan, secured creditors would be paid in full in cash, with the sale proceeds of their collateral or with the collateral securing their claims. Secured claims include $6.78 billion in secured aircraft claims and $3.47 billion in other secured claims.

AMR on March 27 won approval to effectuate its merger with US Airways, which would survive as a wholly owned subsidiary of AMR. AMR would rename itself American Airlines Group Inc. and would own all of the equity interests in American Airlines Inc., AMR Eagle Holding Corp., US Airways and all subsidiaries.

The plan estimates $967.13 million in unsecured claims and $700,000 in other general unsecured claims owed by AMR Corp., $1.97 billion by American Airlines and $20.2 million by AMR Eagle. Those creditors would receive pro rata shares of new mandatory convertible preferred stock.

Priority claims ($356.7 million) and administrative claims ($290.4 million) would be paid in full on the effective date. Priority tax claims would be paid in full within five years.

The convenience claims of Eagle ($2.5 million) and American Airlines ($7.5 million) would be paid in full.

Other equity interests would be reinstated.

US Airways shareholders would get one share of common stock at 1 cent per share for each of their shares for a total of 28% of the diluted equity interests in the new company. The remaining 72% would be distributable to unsecured creditors, labor unions, certain employees and holders of AMR equity interests. The U.S. Airline Pilots Association would get 13.5% of new common stock, the Transport Workers Union of America AFL-CIO 4.8% and the Association of Flight Attendants 3%. The unions are owed $1.72 billion.

AMR would have to pay $135 million to US Airways if it terminates the agreement to enter a superior proposal, while US Airways would have to pay AMR $55 million if it terminated the agreement. Either party would have to pay the other $195 million in the event of a deliberate breach in the merger agreement.

The plan calls for a 12-member board of directors to operate the company, including five from the committee of unsecured creditors and certain other creditors, with two chosen by AMR and three chosen by US Airways.

AMR chief executive and president Thomas W. Horton would serve as chairman of the new company until the earlier of one year after the occurrence of the merger's closing or the day before the first annual meeting of shareholders. US Airway chief executive W. Douglas Parker would serve as the new company's CEO and would become chairman upon Horton's exit.

AMR on Feb. 14 announced its deal to merge with US Airways. The airlines hope to close the deal by the end of the third quarter.

The combined company would have an implied equity value of $11 billion based on the price of US Airways' stock as of Feb. 13. The motion valued the amount to be distributed to AMR's stakeholders at $8 billion.

Documents show creditors owed about $1.2 billion in unsecured debt have agreed to support a reorganization plan including the merger, which also would guarantee 3.5% of new shares would go to AMR's equity holders.

AMR said the merger would generate more than $1 billion in synergies in 2015 while allowing the company to expand its service and increase revenue and liquidity. Furthermore, the companies have executed collective bargaining agreements with their unions relating to the merger.

The company pledged $900 million in revenue improvement from the combined network and $550 million in cost synergies, with the savings partially offset by $400 million in higher wage rates. AMR also said the companies have total outstanding orders for 600 new aircraft, which would give the combined airline one of the most modern and efficient fleets in the industry.

AMR projected the merger would cost the companies $1.2 billion spread over the next three years.

American Airlines was the only major U.S. airline that had not sought Chapter 11 protection until Nov. 29, 2011, when it filed its own petition. AMR blamed its bankruptcy on weak financial performance since 2009, which has left the company behind its major rivals, many of which restructured and emerged from bankruptcy before 2009.

AMR was hurt further by an uncertain economic outlook, volatile fuel prices, an uncompetitive cost structure and a diminishing financial condition, which had been the subject of industry analyst reports and the cause of speculation about a possible bankruptcy filing.

An AMR spokesman declined to comment on the case.