AMR Seeks to Pay Rothschild $15 Million Fee as Adviser
AMR Corp. (AMR), the bankrupt parent of American Airlines, asked a federal judge to approve the hiring of Rothschild Inc. as a financial adviser and investment banker, with a promise of $15 million in fees for the firm when either a bankruptcy plan or restructuring transaction is approved.
Rothschild, which is already working for AMR on a $400,000 retainer, would get a monthly fee of $200,000, so-called new capital fees of 1 percent to 3 percent of the amount raised, and reimbursed expenses, according to a court filing in U.S. Bankruptcy Court in Manhattan. The investment banking firm, which advised AMR before it sought court protection, has valuable knowledge of the company’s finances and creditors, AMR said yesterday in its request to the judge.
Rothschild’s proposed fees fall within “the range of investment banking fees in other large and complex Chapter 11 cases,” AMR said.
Once the world’s largest airline, AMR filed for bankruptcy on Nov. 29 listing debt of almost $30 billion. AMR shares will be removed from the New York Stock Exchange before trading begins on Jan. 5, NYSE Euronext said today.
The stock has retreated 68 percent to 52 cents since Fort Worth, Texas-based AMR filed for Chapter 11, with an average of 73.7 million shares changing hands each day.
Monitors Bankruptcies
Bankrupt companies often hire advisers before getting a judge’s permission. The U.S. Trustee who monitors bankruptcies faulted Lehman Brothers Holdings Inc. (LEHMQ) for hiring Gleacher & Co. without first asking a judge. Lehman, which filed the biggest bankruptcy in U.S. history in 2008, also said it planned to pay Gleacher $15 million if a deal is consummated.
Rothschild has been advising AMR since 2006. The New York- based firm said it was retained for “restructuring efforts” on Oct. 17, more than a month before AMR’s bankruptcy filing. Rothschild described itself in court papers as an experienced adviser to “financially challenged” companies, including UAL Corp. in its bankruptcy case.
Since then, Rothschild has reviewed AMR’s assets, operations and strategies, analyzing its business plans and financial projections in light of industry trends, according to the declaration by David Resnick, chairman of Rothschild’s global financing advisory services.
The firm also has assessed how much debt AMR can carry with its projected cash flows, and has participated in board meetings after preparing “materials” for the airline company, Resnick said.
Flight Attendants
The Association of Professional Flight Attendants told members today that it hired Jefferies & Co. to serve as its financial adviser during the bankruptcy. Jefferies, a New York- based investment banker, joins two law firms already hired by the union, which represents 17,000 active American flight attendants.
“There is no shortcut, there is no alternative,” APFA President Laura Glading told members in an e-mail. “We have but one choice -- to be equipped to fight as hard and as well as the circumstances demand.”
The APFA, Allied Pilots Association and Transport Workers Union all have seats on the unsecured creditors committee for AMR’s bankruptcy. The pilots union earlier hired Lazard Ltd. (LAZ) as its financial adviser for the case.
AMR this month won court permission to pursue a deal to buy 32 planes from Boeing Co. (BA) through 2012, and to reject leases on some aircraft as it reorganizes with a more competitive fleet.
U.S. Bankruptcy Judge Sean Lane in Manhattan is overseeing the bankruptcy of AMR, now the third-largest U.S. airline company.
The case is In re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net.
To contact the editor responsible for this story: Stephen Farr at sfarr@bloomberg.net.
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