The parent company of American Airlines, AMR Corp has formally sought exit from bankruptcy protection last Monday. With the move, the proposed US$11 billion merger with US Airways is now one step towards completion.
The bankruptcy exit was formalized through a reorganization plan detailing compensation packages for management and defines measures for shareholders and creditor. This is a required step before the two airlines can merge to become the world's largest air carrier. This plan though requires both court and creditor approvals.
Amongst the prickly issues are the severance proposals, which US Bankruptcy Judge Sean Lane declined to approve earlier this month. Another concern would be payment of creditors, which under the submitted reorganization plan would have secured creditors paid in full and unsecured creditors would receive shares of preferred stock.
Another major highlight is that AMR shareholders would be receiving 3.5% equity shareholdings in the new air carrier. This would mark one of the few major bankruptcies where equity holders would be able to recover some value, which many forecast as between US$350 million and US$400 million.
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