American Airlines (AMR) obtains Disclosure Statement Approval
Bankruptcy Court approves AMR’s disclosure statement
Dallas, Texas | On November 29, 2011, AMR Corporation (American Airlines) and certain of its affiliates (the “Debtors”) filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). These Chapter 11 Cases were assigned to the Honorable Sean H. Lane and are being jointly administered under the main case, AMR Corporation, Chapter 11, Case No. 11-15463 (SHL).
On June 4, 2013, The Honorable United States Bankruptcy Court H. Judge Sean Lane approved AMR Corp.’s disclosure statement as containing sufficient information to solicit votes from creditors (the first step in the plan approval process). AMR has requested August 15 as the hearing date to ask for confirmation (approval) of the plan by the Bankruptcy Court.
The United States Trustee had objected to the disclosure statement and a severance package to AMR chairman and CEO Tom Horton of approximately $19.985 million and the fees of the restructuring professionals. The Judge ruled that the Disclosure Statement provided sufficient information regarding the severance package for creditors to decide if they would approve it. The Court held that these were not disclosure statement issues but confirmation issues and will take up the issues of approval at the confirmation hearing or thereafter.
The Plan contemplates the merger of American Airlines with US Airways as it emerges from bankruptcy. Current AMR shareholders will receive a 3.5 percent stake in the new airline, a nice but somewhat unusual example of a bankruptcy in which shareholders do not walk away empty-handed. The company has projected the value of the stake approaching the $400 million.
Its unsecured creditors’ committee set the tone for the case, demanding that AMR resolve years of bitter labor talks with its unions. The company eventually reached cost-saving labor contracts with its pilots’, flight attendants’ and ground workers’ unions, but the process left the labor force at odds with AMR management, and unions lobbied heavily for a US Airways merger.