Bank Sues American Airlines Over Refinancing
Follow the action on Twitter by using the widget on the righthand side of this page.
NEW YORK (AP) – A trustee for investors owed more than $1.1 billion for notes secured by aircraft is suing American Airlines over the carrier’s plan to refinance the debt at lower rates.
The trustee, U.S. Bank Trust National Association, said American is using its bankruptcy filing as a ploy to avoid early repayment charges.
U.S. Bank said the refinancing isn’t a consequence of American’s bankruptcy filing, and instead that American and parent AMR Corp. “admit unabashedly that they are pursuing the proposed refinancing because the interest rate environment is favorable.” It said AMR has several billion dollars in cash and can afford the early repayment fees.
The bank made the claim in a lawsuit filed Friday as part of AMR’s bankruptcy case in federal court in New York. It asked the court to require American to pay the fees as long as the airline keeps using the planes.
AMR, which is based in Fort Worth, Texas, has said that the fees sought by U.S. Bank could amount to hundreds of millions of dollars. It contended that in case of a voluntary bankruptcy filing, it must pay principal and earned interest but not the “make-whole” fees.
In an Oct. 30 filing, AMR said it could save more than $200 million in interest payments by refinancing at lower rates.
The notes were issued in 2009 and 2011 and carry annual interest rates of 10.375 percent and 8.625 percent, respectively. Other airlines have recently obtained rates under 5 percent, according to the AMR filing.
(© Copyright 2012 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)
Also Check Out: