Court puts hold on AMR's hiring advisers

NEW YORK -- AMR Corp.'s effort to hire a group of legal and financial advisers for its bankruptcy was put on hold amid objections from unions and the government.

U.S. Bankruptcy Judge Sean Lane said Friday during a hearing that he would approve retaining advisers including Rothschild Inc. and Perella Weinberg Partners on a temporary basis, pending agreement from the U.S. trustee. Fort Worth-based AMR, parent of American Airlines, said it will return to court to seek final approval to hire the firms.

The trustee, which monitors bankruptcy proceedings for the Justice Department, has objected to AMR's plans to hire about a dozen firms to provide legal, labor, financial and other advice as it reorganizes. The trustee said that AMR hasn't shown that it needs all the advisers, that there is was high potential for duplicate services and that some advisers may have conflicts of interest.

Employees at American Airlines and American Eagle objected to some firms, including Bain & Co. as strategic consultants for Eagle and SkyWorks Capital as an aircraft restructuring adviser.

The committee representing unsecured creditors also has "some issues" with the professional applications that it hopes to resolve with AMR, Jack Butler, an attorney for the panel, said at the hearing.

Interim approval for the firms lets them seek court approval for monthly or hourly compensation, AMR's bankruptcy attorney Harvey Miller said.

Rothschild's compensation includes a so-called completion fee of $15 million in addition to $200,000 a month.

"They have no protection as to compensation," Miller said at the hearing, referring to the advisers.

AMR also filed dozens of requests this week asking for extensions on more than 400 aircraft, including all 216 ERJ-145s it operates in its American Eagle fleet. The company had until late Friday to tell the court whether it wants to keep aircraft, renegotiate leases or abandon leases. If it did not meet the deadline, lenders can repossess the aircraft.

AMR told the court that it planned to keep 79 Boeing 737-800s, 14 Boeing 757-200s, 17 Boeing 767-300s and nine Boeing 777-200s and would pay "cure" amounts totaling $50.9 million to bring financing agreements on all but four of those aircraft up to date.

It also asked to keep 36 MD-80s.

Also Friday, the new AMR Retirees Pension Protection Corp. asked the bankruptcy judge to appoint an official retiree committee to protect its interests.

The group seeks to let the committee represent retirees whose union has said it does not plan to represent them in court.

AMR filed for Chapter 11 bankruptcy protection Nov. 29, saying it needed to reduce costs and restructure debt to compete with other carriers that used bankruptcy to shed pensions and retiree benefits and secure new labor agreements.

The company is financing its own operations during bankruptcy, using $4.1 billion in cash and short-term investments it held when it sought court protection.

AMR has become the focus of potential takeover bids, with US Airways Group saying it has hired legal and financial advisers to assess a merger.

Delta Air Lines and TPG Capital are also evaluating options for AMR, people familiar with the matter have said.

The Wall Street Journal reported Friday that Delta was also studying an acquisition of US Airways but has not approached the Phoenix-based carrier.

Staff writer Andrea Ahles contributed to this report, which includes material from Bloomberg News.

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