American Parent AMR Seeks to Reject Paying on Dallas-Area Airport Bonds
Stock Chart for AMR Corp (AAMRQ)
AMR Corp. (AMR) and its American Airlines unit, the third-largest U.S. carrier, want to stop paying on $1 billion of municipal bonds that financed Dallas-area airport facilities without giving up their use.
The company asked a U.S. Bankruptcy judge in New York to let it reject facilities agreements at Dallas-Fort Worth International and Alliance Airport, according to a court document. Under the arrangements, American makes payments on revenue bonds used to pay for such things as passenger gates.
AMR examined its costs under the agreements and “concluded these obligations constitute an unnecessary ongoing expense” and decided that rejecting the agreements was “in the best interests” of the company, according to the Feb. 23 filing.
“If AMR is rejecting the leases, it may just be a negotiating tactic to get better terms,” said Phil Villaluz, managing director of municipal research at Sterne Agee & Leach Inc. in New York.
American previously announced plans to close a maintenance facility at Alliance, which is mostly used to transport freight and is owned by the city of Fort Worth. The carrier plans to keep operating at Dallas-Fort Worth International.
Other Agreements Unaffected
“The motion to reject the special facility revenue bond facilities agreements at DFW and AFW does not relate to our leases of space and premises at those airports,” Sean Collins, an AMR spokesman, said by e-mail.
Prices rose for some American-backed bonds for Dallas-Fort Worth, after falling as much as 68 percent following AMR’s Chapter 11 bankruptcy filing Nov. 29, according to data compiled by Bloomberg. A bond maturing in May 2029 traded at an average of 26.75 cents on the dollar today, up from 26 cents on the dollar on Feb. 2, the data show.
The airports bear no responsibility for airline special facilities bonds, which are obligations of companies such as AMR under agreements put in place when the debt is sold. Pursuant to each deal, “American Airlines agreed to make payments sufficient in amounts to pay, when due, the principal of and interest on, the special facility revenue bonds,” the company said in the court document.
American has separate agreements under which it is a tenant of the airports, and these aren’t affected by AMR’s request.
“This doesn’t have any impact on DFW’s daily operations or its capital program,’ David Magana, a spokesman for the airport, said today by telephone.
William Welstead, acting director of Fort Worth’s aviation department, declined to comment.
AMR and American sold the tax-exempt facilities bonds through airports and municipal authorities to pay for such things as maintenance hangars in New York, Los Angeles, Dallas and other cities. About $3.2 billion of the debt was outstanding when American became the final large U.S. full-fare airline to seek court protection following the Sept. 11, 2001, terrorist attacks. It listed $29.6 billion in debts and $24.7 billion of assets in documents filed yesterday.
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