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September 20, 2012

Some AMR bondholders say American not taking care of planes

Some creditors of American Airlines say the airline isn't keeping up with the needed maintenance work on the airplanes that are the collateral for their bonds, Reuters reports.

The bondholders' agent, U.S. Bank, is expected to argue at a Thursday hearing in U.S. Bankruptcy Court in Manhattan that the airline unit of AMR Corp has neglected its planes, and failed to make hundreds of repairs.

They fear that this and other costs could force the value of the planes to sink too low to cover the bonds.

The value "will continue to erode as a result of the costs to insure, store, ferry, market and sell the aircraft," U.S. Bank said in court papers.

Most of the planes are older-model aircraft, including Boeing 757s and MD-82s and MD-83s made by McDonnell Douglas. Payment on the bonds is due Oct. 15.

Sean Collins, a spokesman for American Airlines, on Wednesday disputed the bank's claim, saying there has been "no change in American Airlines' maintenance policies and procedures that would impact the value of the aircraft."

U.S. Bank is seeking to bolster safeguards for the bonds under bankruptcy rules designed to protect secured creditors from declines in the value of collateral.

It wants to file a top-priority bankruptcy claim to ensure bondholders are paid ahead of other creditors, to offset any decrease in value from AMR's alleged delay in making nearly 500 repairs to cabins, engines and plane structures.

U.S. Bank believes it would fetch just $501 million - including $40 million of previously frozen cash collateral to which it seeks access - if it seized and sold the planes. That's barely above the $491 million in principal and interest that it said bondholders are owed.

But AMR said in court papers that U.S. Bank's request "borders on -- if not crosses the line of -- being frivolous."

- Bob Cox

 

 

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Comments

jttrav

What a grasp at straws. If AA neglected planes, there would be hell to pay by the FAA who already has the company in its crosshairs. They just want their money like everyone else, and will do whatever it takes to get as much as they can. Isn't this the same thing that the pilots are doing?

frontline

I resent that, and frankly it's just not true. We are busting our butts to keep the planes maintained and flying.

Bob

There right, the last flight I took on American never left the gate. They than got us a new plane. This replacement new plane never made it in the air. The flight was canceled I had to get another ticket on different airline thank god and this was 2 months ago.I missed some work and vow never to fly them again.

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