AMR files bankruptcy reorganization plan

Posted Monday, Apr. 15, 2013  comments  Print Reprints

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American Airlines is another step closer to merging with US Airways.

On Monday evening, American's parent company, AMR Corp., filed its reorganization plan with the bankruptcy court, outlining how it plans to divide its equity stake in the combined company among creditors, labor unions, employees and shareholders.

"It is the opinion of the debtors that confirmation and implementation of the plan is in the best interests of the debtors' estates, creditors, and equity interest holders. Therefore, the board of directors of AMR and the debtors recommend that creditors and AMR equity interest holders vote to accept the plan," the company said in its disclosure statement.

The company has asked that a court hearing on the reorganization plan be scheduled for May 30, with responses due to the court by May 23. If the court approves the procedure for confirming the reorganization plan, AMR has 60 days to present the plan to creditors before the court holds a confirmation hearing and then allows creditors to vote on the plan to exit bankruptcy.

In the merger, AMR stakeholders will get 72 percent of the new company, which includes a 3.5 percent stake for current AMR stockholders and 23.6 percent for union groups. The deal is valued at around $11 billion.

SEC registration filing

The Fort Worth-based company also made a registration filing notifying the Securities and Exchange Commission of its intent to merge with publicly traded US Airways. The filing also included the proxy asking US Airways shareholders to approve the merger.

According to the merger agreement, which is outlined in the filing, US Airways shareholders will receive 28 percent of the equity in the newly formed carrier. The merger still needs to be approved by US Airways shareholders and by the Department of Justice.

The S-4 filing estimates that 231,489,427 shares will be issued to US Airways shareholders worth approximately $3,645,958,475 as part of the merger.

If the two carriers were combined in 2012, the company would have reported $24.85 billion in revenues and a $1.87 billion loss, which includes $2.2 billion in reorganization costs, the filing said.

Executive pay

The salaries and bonuses of US Airways chief executive Doug Parker and AMR CEO Tom Horton were also disclosed in the SEC filing

Parker earned $5.5 million in stock and cash in 2012, according to a letter sent to employees Monday afternoon.

Parker's base salary was unchanged at $550,000, however, he received $2.7 million in stock grants. He also received $2.2 million in cash as part of the carrier's annual incentive program. His compensation increased 45 percent from the $3.8 million Parker received in 2011.

Horton, who was named chief executive of AMR when it filed for bankruptcy in 2011, did not receive a salary increase in 2012, earning $618,135. He received no bonuses or stock awards last year. The filing noted that Horton received $1.1 million from a change in pension value.

After the merger closes, Horton will become chairman of the new American until the company has its first board meeting in 2014. Parker will become chief executive and then assume the chairman position after Horton steps down.

Merger considered in 2011

As early as April 2011, US Airways board of directors considered making a merger offer to American Airlines.

According to the filing, which gives a detailed timeline of merger discussions between the carriers, US Airways senior management presented an analysis of a possible merger with American at its board meeting in April 2011.

Horton then approached Parker at an industry event in September to discuss a possible combination, although Horton said the two companies should speak after American secured new labor contracts.

In October, AMR chief executive Gerard Arpey encouraged US Airways to leave United Continental's Star Alliance and join American's Oneworld alliance as an "initial step" that could result in a deal later.

It wasn't until after AMR filed for bankruptcy in November 2011 and Arpey resigned that the two parties began serious negotiations, although AMR approached other airlines to gauge their interest in a merger last summer.

After months of negotiations in the fall, the two carriers announced the merger in February.

Andrea Ahles, 817-390-7631

Twitter: @Sky_Talk

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