Goldman Sachs May Play Pivotal Role in American’s Fate
The firm, an AMR bondholder, is among creditors being lobbied by US Airways Group Inc. (LCC) to back a possible takeover bid, said people with knowledge of the matter. Goldman Sachs has encouraged other debt investors to meet with US Airways to see if a merger would recoup more than AMR’s stand-alone plan, said one person, who asked for anonymity because details are private.
Goldman Sachs is seen as an important stakeholder in the case because of the size of the New York-based firm’s holdings in AMR and its influence with other debt investors, the people said.
US Airways is also seeking the backing of creditors including Appaloosa Management LP, Oppenheimer Holdings Inc. (OPY) and Claren Road Asset Management LLC, the people said. Some investors have been trying to form ad-hoc committees and are discussing hiring advisers to negotiate with AMR and US Airways, the people said. Oppenheimer is one of the largest holders of AMR municipal debt, one person said.
Winning over important bondholders would boost efforts by Tempe, Arizona-based US Airways to build support on AMR’s unsecured creditors committee, which can shape the bankrupt company’s decisions. US Airways said last week it was targeting panel members after American’s three major unions endorsed a merger.
Chief Executive Officer Doug Parker hasn’t said when US Airways may make an offer to Fort Worth, Texas-based AMR, which sought protection from creditors on Nov. 29, listing $29.6 billion in debt.
The prospect of mounting a takeover for AMR, the third- largest U.S. carrier, has helped more than double the shares of No. 5 US Airways this year, leading gains among U.S. airlines. The stock rose 4.4 percent to $10.71 yesterday at the close in New York, while Goldman Sachs fell 2 percent to $111.53.
American’s $177.7 million of 6.977 percent pass-through certificates due May 2021 rose 1 cent to 91 cents on the dollar yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Until recently, Goldman Sachs was also advising Delta Air Lines Inc. (DAL) on whether to make a competing bid for AMR, said another person. Delta told some outside advisers more than a month ago to halt work on the effort because the carrier wasn’t likely to proceed with an offer, this person said.
Banks sometimes find themselves confidentially advising a client on a situation that its traders also hold a position in, and have rules to prevent employees from talking to each other. Goldman Sachs’s holding in AMR bonds is a balance-sheet investment, meaning it was made by the sales and trading group for its own account, said a person familiar with the matter.
Spokeswomen for New York-based Goldman Sachs and Oppenheimer declined to comment, as did spokesmen for US Airways and Delta. Telephone messages left with Appaloosa and Claren Road weren’t immediately returned.
Sean Collins, an American spokesman, declined to comment, beyond citing CEO Tom Horton’s remarks in an April 23 employee letter in which he said the airline’s fate would be resolved “in a disciplined manner and process.”
US Airways’ plan for a merger with American would produce higher returns than AMR’s strategy and create a more valuable company after bankruptcy, CEO Parker said on April 25.
Merger Savings Seen
President Scott Kirby said the same day that a takeover would produce at least $1.2 billion a year in cost savings and increased revenue. Those savings would occur even after US Airways raised wages for most employees of a combined airline, Kirby said.
While Horton has said American prefers to remain an independent airline, a banker at AMR adviser Rothschild Inc. testified last week that a merger probably would be considered as the company seeks to get the best deal for stakeholders.
American’s unions hold three of nine seats on the creditors’ committee. Bondholders are represented by Manufacturers & Traders Trust, M&T Bank Corp. (MTB)’s Wilmington Trust and Bank of New York Mellon Group.
The Allied Pilots Association, Transport Workers Union and Association of Professional Flight Attendants are urging AMR’s board to “engage with US Airways management now” and proceed with a merger. The unions made that argument in advertisements being published today in the Wall Street Journal and in the hometown Dallas Morning News and Fort Worth Star-Telegram.
To contact the reporters on this story: Jeffrey McCracken in New York at firstname.lastname@example.org; Mary Schlangenstein in Dallas at email@example.com; Zachary R. Mider in New York at firstname.lastname@example.org
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