AMR Blindsides Bond-holders to Cut Interest

AMR Corp., the airline owner that’s under bankruptcy court protection, is attempting to trim $200 million of interest expense by forcing investors to sell back $1.3 billion of secured notes at below-market prices.

The owner of American Airlines is seeking court permission to repay debt backed by jets while avoiding having to pay bondholders as much as 50 percent more than face value, according to an Oct. 9 filing in U.S Bankruptcy Court in Manhattan. It plans to refinance the securities with similar debt at lower rates.

While the existing notes have lost as much as $60 million in value since then, they’re trading above the call price, indicating investors expect the airline won’t succeed.

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