Court Updates

May 10, 2013

Summary of Motion to Approve MOU

The Debtors filed a motion seeking to approve the memoranda of understanding among certain of the Debtors,  US Airways, Inc. and any successor (“US Airways”) and the various unions representing the employees of the Debtors and US Airways.  The memoranda of understanding address the effect of the expected merger between American and U.S.  Airways.  With regard to the TWU, the memorandum of understanding (the “MOU”) provides as follows:

i. New CBA Modifications. Upon the effective date of the merger, the terms and conditions of the new collective bargaining agreements of the seven TWU-represented workgroups that were previously approved by the Bankruptcy Court on June 28, 2012 and September 12, 2012, respectively, will continue to remain in full force and effect, except that:

May 09, 2013

The debtors plan to file a motion to approve the (a) a memorandum of understanding regarding contingent collective bargaining agreement among AA, US Airways, Inc. and any successor (“US Airways”), APA and US Airline Pilots Association (“USAPA”), together with (b) a letter agreement, dated January 4, 2013, between AA and APA regarding reimbursement of merger-related expenses, (c) a letter agreement between AA, US Airways, APA and USAPA regarding USAPA MOU vote ratification timing, executed on February 5, 2013, (d) a letter agreement, dated January 7, 2013, between US Airways and APA regarding MOU bargaining history, copying AA counsel, and (e) a letter agreement, dated March 20, 2013, between AA, US Airways and APA confirming modifications to the APA CBA (defined below) (collectively, the “Pilots MOU”), and (ii) a memorandum of understanding among AA, US Airways and the TWU (the “TWU MOU,” and together with the Pilots MOU, the “MOUs”).
 
We expect the motion to be scheduled for hearing May 30, 2013 at 11:00 AM with an objection deadline of May 23, 2013.

May 09, 2013

THE DEBTORS’ AND COMMITTEE’S APPLICATIONS TO AMEND RETENTION AGREEMENTS. 
 
On April 25, 2013, AMR Corporation (“AMR”) filed an application to amend the retention agreement of its financial advisor and investment banker, Rothschild Inc. (“Rothschild”), to provide for a fee (the “New Capital Fee”) of 1%, not to exceed $10 million, of the proposed chapter 11 exit financing (the “Exit Financing”)  in connection with the merger contemplated by AMR’s proposed plan of reorganization (“Plan”).  Similarly, the creditors committee filed an application to amend the engagement agreement of its investment banker, Moelis & Co. LLC (“Moelis”),  to provide for a New Capital Fee of .5%, but not to exceed $5 million, of the proposed Exit Financing.  

April 18, 2013

Bankruptcy Court Reschedules Hearing To Approve Disclosure Statement:
 
Late this afternoon the Bankruptcy Court issued an amended notice advising that the hearing to approve the Disclosure Statement relating to the proposed Plan of Reorganization of AMR Corporation  and related affiliates has been rescheduled from May 30, 2013,  to June 4, 2013 at 11:00 a.m.  Objections to the Disclosure Statement are due by May 24, 2013.  We will keep you posted of any new developments.

April 16, 2013

On the evening of April 15, 2013, American Airlines, Inc. and its affiliates (“AMR”) filed their proposed plan of reorganization (the “Plan”) and related disclosure statement (“Disclosure Statement”) with the Bankruptcy Court along with a motion (the “Motion”) requesting the Bankruptcy Court to establish various deadlines and hearing dates leading up to approval and confirmation of the Plan by the Bankruptcy Court (copies of the Plan, Disclosure Statement and Motion are attached hereto).  The schedule proposed by AMR is as follows:

April 11, 2013

We attach a copy of the court’s  decision in connection with  the debtors’ motion under sections 363, 503(b), and 105(a) of the Bankruptcy Code for approval of an agreement to merge the debtors and US Airways Group, Inc. (“US Airways”), and related relief (the “Motion”).The Court granted the Motion in all respects except for denying the proposed $20 million severance payment to Mr. Thomas Horton, the Chief Executive Officer of the debtor AMR Corporation (“AMR”).  The U.S. Trustee (“UST”) objected to the Motion asserting that certain of the proposed employee arrangements failed to meet the requirements of section 503(c) of the Bankruptcy Code, which places restrictions upon compensation paid to insiders during a bankruptcy case. In connection with the merger, the Motion seeks approval of certain employee compensation and benefit arrangements, referred to as the “Employee Arrangements”, contained in Section 4.10 of the Merger Agreement and Section 4.1(o) of the American Disclosure Letter. These Employee Arrangements fall into three categories: (i) Ordinary Course Changes; (ii) Employee Protection Arrangements; and (iii) the CEO severance payment. In approving the balance of the Motion, including the other Employee Arrangements, the court found that the proposed treatment for Mr. Horton exceeded the permissible treatment under section 503(c) of the Bankruptcy Code. However, it should be noted that section 503(c) might not prohibit the proposed severance treatment in connection with the confirmation of the plan of reorganization that implements the Merger Agreement, as plan confirmation is governed by Bankruptcy Code section 1129 and not section 503(c).
 
Lowenstein Sandler LLP
Sharon L. Levine
Paul Kizel
S. Jason Teele
Tania Ingman
 

April 03, 2013

Set forth below is a summary of matters that were heard by the Bankruptcy Court in the American Airlines chapter 11 cases this morning:
 
I.   Status Conference in Adversary Proceeding, US Airline Pilots Association v. Leonidas, LLC, Adv. Pro. No. 13-01282
 
The Court held a status conference in connection with the complaint (the "USAPA Complaint") entitled US Airline Pilots Association v. Leonidas, LLC, Adv. Pro. No. 13-01282 filed in the Bankruptcy Court by the US Airline Pilots Association ("USAPA") seeking declaratory and injunctive relief.  In particular, the USAPA Complaint seeks a declaration from the Bankruptcy Court that Leonidas, LLC and various individual defendants (the “Pilot Defendants”) have impermissibly interfered with the Bankruptcy Court’s jurisdiction by (a) announcing an intention to commence litigation to enjoin the  Debtors’ proposed merger with US Airways, and (b) then subsequently filing an action in the United States District Court for the District of Arizona (the "Arizona Litigation") that impermissibly interferes with the proposed merger.

March 27, 2013

By motion filed with the Court on February 22, 2013, the Debtors sought  approval of AMR’s execution of and entry into an Agreement and Plan of Merger (the “Merger Agreement”) among AMR ,the so-called  AMR Merger Sub, Inc. (“Merger Sub”), and US Airways Group, Inc. (“US Airways”), dated February 13, 2013.  The Debtors submit that entry into the Merger Agreement is an essential step towards the Debtors’ successful reorganization and emergence from chapter 11, which will maximize recoveries to their economic stakeholders.

March 19, 2013

As you may recall, on July 6, 2012. AMR filed a complaint asking the bankruptcy court to declare that none of AMR’s current retirees (both union or non-union) have a vested right to retiree medical benefits. AMR asserts that under ERISA, the health and welfare benefits the debtors provide to current retirees (including TWU retirees) are welfare benefits and that these welfare benefits only vest where the debtors as the plan sponsor (1) promises to provide benefits for life and (2) do not reserve the right to modify or terminate those benefits. In order to vest benefits, AMR asserts that the benefit plans must provide in a specific written pledge to continue benefits for the remainder of the participants' lives. The debtors argue that statements merely describing the benefits to be provided and the current cost structure of the plan do not create a vested right to benefits. Therefore, AMR hopes the bankruptcy court will enter an order declaring that (1) the retiree health and welfare benefits the Debtors currently provide to union retirees, the pilot retirees, the TWU retirees, flight attendant retirees may be unilaterally modified by the debtors without an 1114 process.

Court Update Mar 14, 2013
March 14, 2013

The Debtors and the Committee filed a joint exclusivity extension motion for hearing at the Merger Approval Hearing on March 27, 2013.  The exclusivity motion seeks to extend the Debtors' exclusive period to file the plan of reorganization to May 29 and the exclusive period to solicit votes on the plan to July 29, 2013.

Lowenstein Sandler LLP
Sharon L. Levine
S. Jason Teele
Paul Kizel
 

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