Tags: goldman | sachs | american airlines | amr | bankruptcy

Goldman May Play Key Role in American Airlines' Fate

Thursday, 03 May 2012 08:02 PM

Goldman Sachs Group Inc. may emerge as a pivotal participant in deciding the fate of AMR Corp.’s American Airlines in bankruptcy.

The firm, an AMR bondholder, is among creditors being lobbied by US Airways Group Inc. 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.

US Airways is also seeking the backing of creditors including Appaloosa Management LP, Oppenheimer Holdings Inc. 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 US Airways’s efforts to build support on AMR’s unsecured creditors committee, which can influence the bankrupt company’s decisions. Tempe, Arizona-based US Airways said last week it was targeting panel members after American’s three major unions endorsed a merger.

US Airways hasn’t said when it might make an offer to Fort Worth, Texas-based AMR, which sought protection from creditors on Nov. 29, listing $29.6 billion in debt.

Adviser to Delta

Until recently, Goldman Sachs was also advising Delta Air Lines Inc. 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 Chief Executive Officer 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’s View

US Airways’s plan for a merger with American, the third- largest U.S. airline, would produce higher returns than AMR’s strategy and create a more valuable company after bankruptcy, CEO Doug Parker said on April 25.

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, the fifth-biggest U.S. carrier, 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.’s Wilmington Trust and Bank of New York Mellon Group.

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