AMR seeks court approval of $750 million in EETC aircraft financing

By Caroline Salls

Pittsburgh, Jan. 24 - AMR Corp. requested court approval to obtain up to $750 million in enhanced equipment trust certificate (EETC) financing to fund the purchase of new aircraft and the refinancing of existing aircraft loans, according to a Jan. 24 filing with the U.S. Bankruptcy Court for the Southern District of New York.

The company said it has arrangements with Boeing Co. to purchase up to four Boeing 777-323ER aircraft, currently scheduled to be delivered to the AMR debtors between April and August 2013.

According to the motion, debtor American Airlines, Inc. is a party to five pre-bankruptcy mortgage loan facilities, each secured by a Boeing 737-823 aircraft. AMR said these five mortgage loan facilities are each scheduled to mature on March 22, and one mortgage loan facility secured by a Boeing 737-823 aircraft is scheduled to mature on March 29.

In addition, the company said American is a party to aircraft financings that are scheduled to mature on May 23 and July 6. American was also a party to a pre-bankruptcy mortgage loan facility secured by one Boeing 737-823 aircraft. That facility matured and was repaid in full on Nov. 30.

Based on a careful review of the market, AMR said it has concluded that an EETC financing is the optimal transaction to finance the new aircraft and refinance the owned aircraft.

Financing terms

The terms of the proposed financing are as follows:

• American Airlines, Inc. will issue series A equipment notes and series B equipment notes, which will be acquired by a class A trust and a class B trust;

• The class A trust will issue class A pass-through certificates, and the class B trust will issue class B pass-through certificates;

• Wilmington Trust Co. will be the loan trustee;

• The AMR debtors expect the interest rates to be determined upon launch and pricing of the new EETC;

• Principal and interest on the issued and outstanding equipment notes will be payable semiannually. The series A equipment notes are expected to have maturity dates ranging from 5.5 years to 12.5 years, and the series B equipment notes are expected to have maturity dates ranging from 5.5 years to eight years;

• American may elect to redeem all of the equipment notes issued in connection with an aircraft, provided that they are all simultaneously redeemed.

The redemption price will be the unpaid principal amount of the notes being redeemed plus unpaid interest and any make-whole amount; and

• American is obligated to use its best efforts to either complete an exchange for the pass-through certificates by no later than 270 days after its plan of reorganization effective date or to resell the pass-through certificates by no later than 90 days after the 270th day.

If one of these events does not occur by the specified deadlines, the interest rate on the applicable pass-through certificates will increase by 0.5% until the exchange offer or registration is completed.

A hearing is scheduled for Feb. 14.

AMR, the Fort Worth-based parent of American Airlines, filed for bankruptcy on Nov. 29, 2011. Its Chapter 11 case number is 11-15463.

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