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October 23, 2012

Hedge fund wants investigation of American's pre-bankruptcy debt transaction with American Eagle

Marathon Asset Management has asked the bankruptcy court to investigate a pre-bankruptcy debt transaction between American Airlines and regional carrier, American Eagle, alleging the $2.26 billion deal was illegale.

The hedge fund, which has complained to AMR chief executive Tom Horton that the carrier is not being "sufficiently transparent" during the bankruptcy process, made the investigation request in a court filing on Tuesday.

"In the weeks leading up to the filing of the Debtors’ chapter 11 cases, American Eagle and American Airlines consummated a series of intercompany transactions that resulted in American Airlines assuming $2.26 billion of dollars in additional debt that American Eagle previously owed to the Financing Parties (the “Prepetition Transactions”). On their face, the Prepetition Transactions raise serious questions as to whether American Airlines received fair value in exchange for incurring the billions of dollars in debt and as to whether these transactions were otherwise improper," the filing said.

-Andrea Ahles


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Dallas Guy

I remember that and thought than they were going to spin off Eagle to an independent company than go bankrupt. Eagle would have had no debt and Americans creditors and employees would take the hit
I also wondered at that time if it was legal. I had never seen a company do this. Would this be the same as putting your debt on you kid than have them file bankruptcy and you have a clean slate? knowing your kid was going to file bankruptcy anyhow.


"... alleging the $2.26 billion deal was illegale."

ANDREA, doesn't the Startlegram have spellcheck?

We all know that ANDREA has never been taught to spell correctly.

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