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AMR Seeks $958mil Loans - Cover Winter Cash Burn  
User currently offlineLAXintl From United States of America, joined May 2000, 24796 posts, RR: 46
Posted (2 years 9 months 3 weeks 6 days 14 hours ago) and read 11439 times:

AMR filed notice with the SEC on Tuesday its intention to borrow up to $958million via issuance of two sets of aircraft pass through certificates.

AMR intends to essentially issue bonds with collateral of 43 owned aircraft (16-738, 14-757, 13-777s) in a 10-year financial transaction running through October 2021, with interest pricing “above 8%”.

Assuming the deal closes, AMR liquidity should remain north of $3.5bil allowing for working capital and cash burn potentially approaching $1bil in the coming winter.

Story:
http://aviationblog.dallasnews.com/a...merican-airlines-wants-to-rai.html

This is AMR’s 3rd round of boosting liquidity in 2011. In January it up put 30 aircraft as collateral to raise $657 million in cash and in March it raised $1 billion in cash in a private debt offering backed by route authorities, landing slots and airport facilities.



Man, the debt keeps piling up, as the cash burns.


From the desert to the sea, to all of Southern California
62 replies: All unread, showing first 25:
 
User currently offlineSunriseValley From Canada, joined Jul 2004, 4853 posts, RR: 5
Reply 1, posted (2 years 9 months 3 weeks 6 days 14 hours ago) and read 11428 times:

What is the rating on this sort of debt?

User currently offlinemotif1 From United States of America, joined Sep 2005, 245 posts, RR: 0
Reply 2, posted (2 years 9 months 3 weeks 6 days 13 hours ago) and read 11390 times:

Quoting SunriseValley (Reply 1):
What is the rating on this sort of debt?

AA

   Just kidding



Not only is this incomprehensible but the ink is ugly and the paper is from the wrong kind of tree
User currently offlineFlighty From United States of America, joined Apr 2007, 8397 posts, RR: 3
Reply 3, posted (2 years 9 months 3 weeks 6 days 13 hours ago) and read 11277 times:

AA shareholders wake up and fire management in 3, 2, 1....


Edit: Or, if they do have a plan, they should loudly describe the ways that unions are blocking it.

[Edited 2011-09-29 08:40:45]

User currently offlineenilria From Canada, joined Feb 2008, 7031 posts, RR: 13
Reply 4, posted (2 years 9 months 3 weeks 6 days 13 hours ago) and read 11195 times:

Quoting LAXintl (Thread starter):
Man, the debt keeps piling up, as the cash burns.

Does anybody know the implied Ch11 risk in the interest rate? There is a formula to calculate it versus prime. It must be 75% +.

The USA system is broken. You mortgage a bunch of planes, file Ch11, eliminate the debt, emerge, and remortgage them again. What a joke.


User currently offlinesxf24 From United States of America, joined Aug 2007, 1257 posts, RR: 0
Reply 5, posted (2 years 9 months 3 weeks 6 days 13 hours ago) and read 11064 times:

Quoting enilria (Reply 4):
Does anybody know the implied Ch11 risk in the interest rate? There is a formula to calculate it versus prime. It must be 75% +.

Because the debt is issuance is an EETC, the credit rating and interest rate are based more on the collateral, than AA's financial position. EETC's a structured so the aircraft are held in trust and leased to AA. There is also cash equal to at least 3 interest payments held for the beneficiary of the trust so note holders will continue to be paid in the event of a default.

EETCs also provide additional legal protection to creditors in the event of a bankruptcy, making this type of financial instrument lower risk than other types of airline debt.

Quoting SunriseValley (Reply 1):
What is the rating on this sort of debt?

S&P actually rated the A-tranche (senior) debt A-. This is based on the excellent collateral and a relatively low loan-to-value (about 56%).


User currently offlineDeltaMD90 From United States of America, joined Apr 2008, 7799 posts, RR: 52
Reply 6, posted (2 years 9 months 3 weeks 6 days 13 hours ago) and read 11062 times:

I thought just about every piece of this company was already collateral... what of AA isn't collateral? Are they gonna start using their pilots as collateral next?   


Ironically I have never flown a Delta MD-90 :)
User currently offlineDFWHeavy From United States of America, joined Jul 2011, 560 posts, RR: 0
Reply 7, posted (2 years 9 months 3 weeks 6 days 13 hours ago) and read 11033 times:

I read this yesterday in the Dallas Morning News. Everything they have is mortgaged up to their eyeballs. It will be interesting to see how this plays out should AA file bankruptcy....which they probably will at some point.


Christopher W Slovacek
User currently offlinesxf24 From United States of America, joined Aug 2007, 1257 posts, RR: 0
Reply 8, posted (2 years 9 months 3 weeks 6 days 13 hours ago) and read 10979 times:

Quoting DeltaMD90 (Reply 7):
I thought just about every piece of this company was already collateral... what of AA isn't collateral? Are they gonna start using their pilots as collateral next?

Most of these aircraft were already financed and will be refinanced by this debt. AA will get to keep very little of this cash, but at that same time will not have to pay $800M+ of debt payments this year.


User currently offlinerbgso From United States of America, joined Jun 2006, 587 posts, RR: 0
Reply 9, posted (2 years 9 months 3 weeks 6 days 13 hours ago) and read 10980 times:

8% is a pretty high rate these days, obviously related to the associated risk. I simply don't see the current business plan being sustainable. You cannot borrow your way to prosperity.

User currently offlineStitch From United States of America, joined Jul 2005, 30537 posts, RR: 84
Reply 10, posted (2 years 9 months 3 weeks 6 days 13 hours ago) and read 10957 times:
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I expect AA to file C11 and divest themselves of the bulk of their MD-8X and 757 fleet to reduce future capital (payments) and operating (fuel + maintenance) costs. The Airbus deal is already structured to handle an AA bankruptcy and I expect Boeing was forced to do the same to get the 737 deal.

User currently offlinecommavia From United States of America, joined Apr 2005, 11409 posts, RR: 62
Reply 11, posted (2 years 9 months 3 weeks 6 days 13 hours ago) and read 10876 times:

To be expected when AMR has debt retirements coming up in the near future, and they're about to enter the winter months when operating cash flow is tighter. And, perhaps most importantly, AMR needs cash to fund the substantial capex bill in coming months with all the new aircraft deliveries.

[Edited 2011-09-29 09:19:41]

User currently offlineLAXintl From United States of America, joined May 2000, 24796 posts, RR: 46
Reply 12, posted (2 years 9 months 3 weeks 6 days 12 hours ago) and read 10803 times:

Quoting enilria (Reply 4):
The USA system is broken. You mortgage a bunch of planes, file Ch11, eliminate the debt, emerge, and remortgage them again. What a joke.

Such certificates are entitled to 1110 protections, which limits default risk for trustees on the debt incase of Ch11. In general such pass through certificates are only issued for more modern, mostly liquid aircraft assets over a diverse portfolio, so their risk is considered on the safer side.
Also trustees also ultimately maintain right to take possession of the aircraft if required even in a BK process which provides incentive for debtor to keep paying.



From the desert to the sea, to all of Southern California
User currently offlinerdh3e From United States of America, joined Mar 2011, 1584 posts, RR: 2
Reply 13, posted (2 years 9 months 3 weeks 6 days 12 hours ago) and read 10805 times:

Quoting sxf24 (Reply 9):
Most of these aircraft were already financed and will be refinanced by this debt.

So are you saying they're essentially just refi-ing the AC for a lower interest rate? I'd be surprised it that was the case. Do you have a link?


User currently offlineFlyASAGuy2005 From United States of America, joined Sep 2007, 7004 posts, RR: 11
Reply 14, posted (2 years 9 months 3 weeks 6 days 12 hours ago) and read 10785 times:

Quoting LAXintl (Thread starter):

Ouch!

It seems like with every one of these threads that comes up, there will be those in denial. I've been saying it all through 2011. AA does not seem to have a defined plan to sustainability and profit. Have any of you looked at their investor presentations for crying out loud?! A joke when looking at the size and scope of a company that is American Airlines. Their schedule reduction was a start but it shows their timidness to let go on market share. Day-of-week- reductions has been the norm for NW (pre-merger), DL, and CO for quite a while now. Historically, it hasn't been AA's style of doing business save for Saturday, where just about everyone operates on a reduced flight schedule.

So reading through the filing, it seems to me like they cannot afford to make the big obligations due during year's end, coupled with the naturally softened 4th qtr which is a weaker one. IDK, maybe smarter people than me can show actual numbers and a timeline that AA has made public. I know I see such numbers in all of Delta's presentations.

Quoting Flighty (Reply 3):
AA shareholders wake up and fire management in 3, 2, 1....

I do believe that 2012 will be a new year in almost every sense. And I think that will include a new boss for AMR (just my personal opinion). BTW, how are their stocks doing on the heels of this release?

Quoting DeltaMD90 (Reply 7):
I thought just about every piece of this company was already collateral... what of AA isn't collateral? Are they gonna start using their pilots as collateral next?
Quoting rbgso (Reply 10):
I simply don't see the current business plan being sustainable.

Simply put, it is not.

Quoting rbgso (Reply 10):
You cannot borrow your way to prosperity.

You cannot. The United States Federal Government is only now finding this out go figure LOL. Don't get me wrong, most of the majors have been in this position at some point since 9/11. DL initially got a $500M boost from AMEX early on along with more money from GE Capital, Boeing and others. An additional $1B was leveraged with AMEX through the SkyMiles program at some point as well. Way back when before bankrupcy, when Leo and Michelle was at the reigns, DL mortgaed everything under the son and pissed away $100M in fuel hedging at a time when the price of oil was very low. Well, it bit them in the ass not too long after when everything shot through the roof.

Let me tell you, in this day and age, they won't increase their debt burden if they don't have to so it's clear that they are in a very tight spot.



What gets measured gets done.
User currently onlineHAL From United States of America, joined Jan 2002, 2555 posts, RR: 53
Reply 15, posted (2 years 9 months 3 weeks 6 days 12 hours ago) and read 10787 times:

Quoting motif1 (Reply 2):
Quoting SunriseValley (Reply 1):What is the rating on this sort of debt?
AA

Just kidding

That was the best laugh of the morning!

HAL



One smooth landing is skill. Two in a row is luck. Three in a row and someone is lying.
User currently offlinesxf24 From United States of America, joined Aug 2007, 1257 posts, RR: 0
Reply 16, posted (2 years 9 months 3 weeks 6 days 12 hours ago) and read 10736 times:

Quoting rdh3e (Reply 14):
So are you saying they're essentially just refi-ing the AC for a lower interest rate? I'd be surprised it that was the case. Do you have a link?

They are refinancing at a higher rate. You can see AA's summary here: http://www.sec.gov/Archives/edgar/da.../000095012311086861/d84607afwp.htm


User currently offlinelightsaber From United States of America, joined Jan 2005, 12860 posts, RR: 100
Reply 17, posted (2 years 9 months 3 weeks 6 days 10 hours ago) and read 10268 times:
Support Airliners.net - become a First Class Member!

Wow. Just wow. I'm pessimistic on AA avoiding CH 11 and yet I'm surprised by the magnitude of their cash burn.

Quoting motif1 (Reply 2):
Quoting SunriseValley (Reply 1):
What is the rating on this sort of debt?

AA

Just kidding

   Best comeback of the day!   

Quoting Flighty (Reply 3):
AA shareholders wake up and fire management in 3, 2, 1....

Too late. I see no way for AA to avoid BK. They should finish this transaction and declare. I was of the opinion that they should wait for Aircraft deliveries... But not they are running out of items to hock.

Quoting enilria (Reply 4):
Does anybody know the implied Ch11 risk in the interest rate? There is a formula to calculate it versus prime. It must be 75% +.

While others have already explained the transaction, I would put CH11 at 90%+. If AA is really predicting that type of winter cash burn... I'd put it at 97%+.

Quoting rbgso (Reply 9):
8% is a pretty high rate these days, obviously related to the associated risk. I simply don't see the current business plan being sustainable. You cannot borrow your way to prosperity.

Today it is nearly impossible to raise cash in CH11. If AA doesn't enter CH11 soon, they won't be able to exit.  

I really thought they could wait out a year or maybe a little longer. But now I have extreme doubts. AMR's stock is at a new 52 week low for good reason.

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlinerdh3e From United States of America, joined Mar 2011, 1584 posts, RR: 2
Reply 18, posted (2 years 9 months 3 weeks 6 days 10 hours ago) and read 10224 times:

Quoting lightsaber (Reply 17):
While others have already explained the transaction, I would put CH11 at 90%+. If AA is really predicting that type of winter cash burn... I'd put it at 97%+.

If what the other poster said is true, it seems like raising this cash is to extend their mortgages on those Aircraft. IE, they were to repay the principle, which would have eaten a significant part of their cash, so they refinanced the AC in order to reduce their cash outlay. So it's really a move to prevent themselves from laying out this much cash, rather than predicting they are going to be that far negative from operations.

Interesting indeed.


User currently offlineslcdeltarumd11 From United States of America, joined Jan 2004, 3344 posts, RR: 0
Reply 19, posted (2 years 9 months 3 weeks 6 days 9 hours ago) and read 10128 times:

Quoting rbgso (Reply 9):
8% is a pretty high rate these days, obviously related to the associated risk. I simply don't see the current business plan being sustainable. You cannot borrow your way to prosperity.

True but i think the plan is just to borrow until the fuel efficient planes arrive. They are getting a good amount of cash and were able to get the new planes on good terms. Can they last that long?

I think AA needs to rush retire more mad dogs. They are clearly loosing money in this high fuel world we live in. They might need less frequencies on some routes but I don't see them needing to cancel any cities. Just reduce the MD fleet they clearly can't get rid of them all. Personally i really wish the best for AA and they are generating cash and have a good amount but i think something needs to be done to slow down the bleeding.


User currently offlinemoman From United States of America, joined Aug 2004, 1054 posts, RR: 4
Reply 20, posted (2 years 9 months 3 weeks 6 days 9 hours ago) and read 10049 times:

The cornerstone strategy is going to take AA to the grave.


AA Platinum Member - American Airlines Forever
User currently offlinemicstatic From United States of America, joined Jul 2001, 775 posts, RR: 1
Reply 21, posted (2 years 9 months 3 weeks 6 days 9 hours ago) and read 10017 times:

Quoting moman (Reply 20):

The cornerstone strategy is going to take AA to the grave.

No kidding. This is very bad news for AA. Didn't they post somewhere their top 10 money losing routes? I could have sworn I saw LA-NYC on their somewhere??



S340,DH8,AT7,CR2/7,E135/45/170/190,319,320,717,732,733,734,735,737,738,744,752,762,763,764,772,M80,M90
User currently offlinemoman From United States of America, joined Aug 2004, 1054 posts, RR: 4
Reply 22, posted (2 years 9 months 3 weeks 6 days 9 hours ago) and read 9866 times:

Quoting micstatic (Reply 21):
No kidding. This is very bad news for AA. Didn't they post somewhere their top 10 money losing routes? I could have sworn I saw LA-NYC on their somewhere??

No, that was an analyst who estimated AA's losses, although the criteria seemed suspect. I doubt AA loses money on NYC-LHR and MIA-EZE, both of which this analyst said lost money.

As far as cornerstone, I don't see how AA can ever make it work:

NYC - #2/#3 player depending on the metrics
ORD - #2/#3 player depending on the metrics (WN @ MDW included)
DFW - Top dog, WN @ DAL is a threat with the expiration of Wright Amendment
MIA - Top dog, S. FL competition heating up
LAX - #2 after UA

AA loses out on opportunities to serve P2P routes outside of these markets. Right now they are flowing 95% of their traffic over one of these cornerstones.



AA Platinum Member - American Airlines Forever
User currently offlineFlyASAGuy2005 From United States of America, joined Sep 2007, 7004 posts, RR: 11
Reply 23, posted (2 years 9 months 3 weeks 6 days 9 hours ago) and read 9866 times:

Quoting micstatic (Reply 21):
No kidding. This is very bad news for AA. Didn't they post somewhere their top 10 money losing routes? I could have sworn I saw LA-NYC on their somewhere??

AA never posted such information. BTS data can be gathered with some research as to how much someone is making between route pairs but it doesn't really paint a full picture, even if you have the cost per seat mile down. It was some reporter/agency that said their "bread and butter" routes were money losers.

Quoting slcdeltarumd11 (Reply 19):
True but i think the plan is just to borrow until the fuel efficient planes arrive.

That's a plan? As I've said all along, they need a REAL, defined plan with numbers. I have yet to see anything that even shows how much they plan on saving with these shiney new plans that they won't even own BTW. Point blank, Boeing and Airbus have them by the balls with the deal.



What gets measured gets done.
User currently offlinemoman From United States of America, joined Aug 2004, 1054 posts, RR: 4
Reply 24, posted (2 years 9 months 3 weeks 6 days 9 hours ago) and read 9834 times:

Quoting FlyASAGuy2005 (Reply 23):
That's a plan? As I've said all along, they need a REAL, defined plan with numbers. I have yet to see anything that even shows how much they plan on saving with these shiney new plans that they won't even own BTW. Point blank, Boeing and Airbus have them by the balls with the deal.

I got attacked for saying it last time, but I still believe AA is looking at the wrong thing to fix with respect to the fleet. If they would circle the MD-80 fleet around DFW and use it where the fuel burn doesn't matter so much. If the Dugan mod works out, that's even more savings in the bank.

[Edited 2011-09-29 13:10:15]


AA Platinum Member - American Airlines Forever
25 micstatic : thanks for clarifying guys. Either way, I think we all agree that AA will have to morph in a major way to get back into the black. Simply having more
26 slcdeltarumd11 : NYC - #2/#3 player depending on the metrics ORD - #2/#3 player depending on the metrics (WN @ MDW included) DFW - Top dog, WN @ DAL is a threat with t
27 LAXtoATL : Maybe it was suppose to be the gravestone strategy and it got misinterpreted as it moved up the chain. AA never posted nor never would announce their
28 moman : Agreed with that, but blaming the aircraft for the revenue/cost problem is a little simplistic. I recall Jack Welch of GE saying that if you can't be
29 Post contains images lightsaber : Won't help. The 737NG and A32x have improved their maintenance costs to the point that even without a fuel burn savings a new leased 737NG/A32x is ch
30 goldenstate : AA cannot compete beyond the cornerstones, or even address network gaps from the cornerstones, until their structural cost issues are resolved. Retre
31 par13del : Thy won't need to, AA will shed more than expensive leases in Chpt.11, if they emerge by themselve they will be a smaller carrier and even if their c
32 NYCAdvantage : The way it's going I wonder who is going to fly those new birds, just read this today. "Adding to the urgency for a pilot accord is the fact that Ame
33 ckfred : This sentiment was repeated many times, as the UA bankruptcy dragged on. It's a policy issue. In Europe, bankruptcy is designed to get the creditors
34 fxramper : As stated by Stich, both a/c deals AA made are structured for an eminent chp 11. They should get their winter survival loan, files chp 11, replace Arp
35 Max Q : Far better to file for bankruptcy now while they still have some cash and some ability to affect the outcome. If they wait much longer there is a very
36 aacun : I think most of us AA employees will agree on this. Just declare bankruptcy, stop stalling. So we can get on with our lives, File, get someone who ac
37 FlyASAGuy2005 : Can't really do selective quoting because I'm on my phone but your 5th paragraph shows the fundimental problem that is the current AMR management tea
38 comorin : Goos post, sir. I don't have access to a BB terminal but do you know what the CDS spread is on AMR? It will help answer this question on implied defa
39 okie : Well not working for AA I would say this. I have watched the ups and downs of the industry for many a year and it has not mattered much whether it wa
40 Post contains links lightsaber : "Credit-default swaps on the parent of American Airlines soared to 49.5 percent upfront yesterday from 29.25 percent on Aug. 1, according to CMA. That
41 acelanzarote : Where would this leave BA and Oneworld if the unthinkable happened with AA?
42 Byrdluvs747 : You do realize that once AA files, AMR won't have to "reach agreement" with the unions. The unions will have to take whatever gets handed to them in
43 UAL777UK : When I see all this and I see AA teetering with CH11, I wonder if a certain Glen Tilton is wating for his phone to ring??
44 twinotter : American's situation notwithstanding, as a blanket statement this is not true. Most businesses were not profitable at startup and go through periods
45 jfk777 : A JOKE ? Really. Airplane debt holders are secured whatever else may happen with an airline bankruptcy. Boeing 738 & 777 are desirable planes if
46 STT757 : If AA files CH-11 I would expect AA's board to be getting phone calls from Tempe.
47 Post contains images par13del : Since DL/NW and CO/UA hooked up, all that was left of the legacies was AA and the US/HP conglomerate, so if the trend is that consolidation must occu
48 delta2ual : How times have changed. After reading "Skygods" about Pan Am (someone on here recommended it), it's hard to believe that AA is now the "financially tr
49 comorin : Thanks, lightsaber! CDS modeling may be fun for someone with your sharp mind to wade into. It's a lot of calcs based on guesses - but the virtue of i
50 Post contains images rdh3e : I think a Glenn Tilton / John Tague team up would suit AA nicely. Tilton plays the role of the b@stard trying to skeez all the money out of the compa
51 DL WIDGET HEAD : That's who you would turn to? Seriously? He would probably be welcomed at AA as much as Frank Lorenzo or Carl Ichan. He was hated at UA and nearly ru
52 rdh3e : False. Hated? Yes. Successful? Even more so. I would say in BK, the amount your unions hate you is probably inverse to the success you're going to ha
53 UAL777UK : People can say what they like about Tilton but if it was not for him we would probably be talking about UA in the past tense now. Now if and I say if
54 FlyASAGuy2005 : You know the turn of this thread raises an interesting question. Most of the die-hard, seasoned aviation buffs has either passed or is in long retirem
55 micstatic : What about Ed Bastian?
56 DL WIDGET HEAD : Don't think DL will let him go and he probably has a non compete clause in his contract anyway, at least for a few years.
57 micstatic : oh yes, forgot to consider the non-compete likely in place.
58 FlyASAGuy2005 : Ed is already slated to take RA's spot when he retires. He'll be with DL for several more years.
59 Byrdluvs747 : Just bring back Crandall.
60 Post contains images lightsaber : Thanks for the quick analysis. 80% chance CH11 within 12 months. I believe the CDS markets more than a.net opinion... Lightsaber
61 delta2ual : I don't think he will go down in history as a great CEO. UA's BK, which had to be extended twice, was the longest in US airline history. Tilton dumpe
62 LAXintl : Looks like per SEC filings, AMR managed to issue 10-year $725.7mil in equipment indenture notes through U.S. Bank Trust bearing interest at the rate o
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