U.S. Trustee again objects to severance for AMR’s Horton

Posted Friday, Aug. 02, 2013  comments  Print Reprints
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The U.S. Trustee in AMR Corp.’s bankruptcy case filed another objection Friday to a proposed $20 million severance payment for AMR’s chief executive Tom Horton.

The trustee has made the same objection two other times during the bankruptcy process. And each time, the judge has declined to approve the severance, saying he would consider it when he makes a final ruling on the carrier’s reorganization plan later this month.

“The United States Trustee respectfully submits that the Court deny the Debtors’ attempt to pay the Debtors’ CEO a $20 million severance,” the filing said, arguing that the payment does not conform to restrictions placed on compensation arrangements by the U.S. Bankruptcy Code.

A hearing is set for Aug. 15 for U.S. Bankruptcy Judge Sean Lane to confirm or deny AMR’s restructuring plan, which includes a merger with US Airways. AMR’s creditors have voted in favor of the plan and the companies expect to close the deal in September, pending government approval.

AMR disagrees with the trustee’s objection and has said previously that the newly merged company is making the payment to Horton, not AMR.

“The Chairman Letter Agreement is not in any way prohibited by the terms and provisions of the Bankruptcy Code,” said AMR spokesman Michael Trevino. “Furthermore, AMR’s creditors and shareholders have voted overwhelmingly to accept the Plan which includes the Chairman Letter Agreement.”

Horton is expected to stay on with the new company, which will be called American Airlines Group, as non-executive chairman and then exit the position sometime next year. Doug Parker, chairman and CEO of US Airways, would become American’s new chief executive officer.

In a written ruling in April, Lane questioned the timing of AMR’s seeking court approval for the severance.

“It is unclear what purpose would be served by the court’s approval of the severance if [the merged carrier] could later veto the severance through a vote of its board. Indeed, under this proposed amendment, there is little reason for the Court to be involved at all, “ Lane wrote.

In 2005, Congress amended the bankruptcy code to include limits on executive severance. Payments are allowed as long as the amount is not greater than 10 times that offered to nonmanagement employees during the calendar year.

Andrea Ahles, 817-390-7631 Twitter: @Sky_Talk

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