Shares of old AMR stock are gaining value, analyst says

AMR Corp. turned out to be a profitable investment even for those who bought shares of the American Airlines parent company just before it merged with US Airways Group.

When the two carriers completed their merger to create the world’s largest airline last week, the old AMR shares finished trading at $11.39.

But by Tuesday, the intrinsic value of an “old” AMR share had risen to $17.19, according to analyst Kevin Starke, who cited the value of equity in newly formed American Airlines Group that shareholders have received and will receive under the plan.

The stock was even more valuable for those who realized earlier in the bankruptcy case that the holding company was solvent even if the airline unit wasn’t. AMR shares sold for about 40 cents in October 2012 and rose to $1.30 before the merger was announced in February.

It “was just about the best bankruptcy ever,” said Starke, a managing director at CRT Capital Group in Stamford, Conn. “It’s insane how well it turned out.”

Still, AMR investors must wait to count their profits. Under the first distribution, old shareholders got just $1.74 in American Airlines Group stock for each AMR share. Three more distributions are scheduled in the next few months, plus more as claims are resolved, Starke said.

Assuming that the new stock of the merged company (ticker: AAL) remains at $26.20, where it was trading at midday Tuesday, the next three distributions will be worth an additional $13.70, Starke said.

Combined with the first $1.74 distribution, stockholders will have pocketed $15.44 within months. American Airlines Group gained 13 cents to $26.23 on Wednesday.

About 10 percent of the value in the old stock is tied up in final distributions that could come years from now as claims are reduced, Starke said.

But holders of the old stock are at risk if the price of the merged company’s stock declines. For each $1 change in price of the new stock, the old shares move $1.36, Starke said.