Marathon Seeks Probe Insto AMR Debt Deal Pre-Bankruptcy

Marathon Asset Management LP, the hedge fund that called on American Airlines to broaden talks with creditors in its bankruptcy case, seeks a court-ordered investigation into an intercompany debt deal at the airline.

Before last year’s bankruptcy filing, AMR Corp.’s American took on $2.26 billion in debt that regional carrier American Eagle owed under aircraft-financing agreements, Marathon said in a filing yesterday in U.S. Bankruptcy Court in Manhattan.

“The prepetition transactions raise serious questions as to whether American Airlines received fair value in exchange for incurring the billions of dollars in debt and as to whether these transactions were otherwise improper,” Marathon said.

Marathon and Appaloosa Management LP in an Oct. 18 letter to American Chief Executive Officer Tom Horton criticized the carrier’s negotiations with a creditor group, saying American wasn’t being “sufficiently transparent.”

Marathon yesterday asked U.S. Bankruptcy Judge Sean Lane to order an examiner to investigate the transactions with American Eagle, saying it isn’t possible for AMR management to undertake “an objective and critical review.”

Sean Collins, a spokesman for Fort Worth, Texas-based American, said in an e-mailed statement that the company “will respond to the examiner motion in due course and address it before the bankruptcy court.”

The case is In re AMR Corp., 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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