AMR Bonds Drop on Plan to Repay Debt at Less Than Market Value

Bonds of AMR Corp. (AAMRQ) fell after the bankrupt airline company sought court permission to repay $1.3 billion of the securities without honoring an early redemption provision and not paying a premium on the debt.

AMR’s $174.2 million of 13 percent secured notes due in August 2016 dropped 3 cents to 103.5 cents on the dollar at 8:31 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Its $703.6 million of 8.625 pass-through certificates plunged 4 cents to 103.5.

The airline wants to redeem the 13 percent notes, the 8.625 certificates and $445.6 million of 10.375 percent pass-through debt, “without the payment of any make-whole amount” or “any other premium or prepayment penalty,” the company said in a filing yesterday in U.S. Bankruptcy Court in Manhattan.

AMR, based in Fort Worth, Texas, said interest-expense savings under the financing may be more than $200 million. The request requires approval from U.S. Bankruptcy Judge Sean Lane.

To contact the reporter on this story: Richard Bravo in New York at rbravo5@bloomberg.net

To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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