A $14 million auction of AMR Corp.'s American Airlines bank debt went off in the 57 range a week ago last Friday, according to dealers. The loan had been quoted in the low 50s range and traded up ahead of a deadline for the company's unions to ratify an agreement that will allow the airline to avert $1.8 billion in costs annually and stave off bankruptcy. Last Wednesday, American Airlines received union approval for the cost-cutting measures. Traders were unsure if more of the American Airlines paper will trade given the loan's relative illiquidity. The piece that traded came from the company's $834 million revolver that expires in December 2005. According to a recent company filing, the revolver is fully drawn.
At the end of last month, American Airlines received lender approval to allow the company to waive the pledging of additional collateral until May 15 and its liquidity covenant for the last quarter. When the waiver expires, American Airlines expects to be required to pledge an additional $451 million in aircraft. The company will also have to maintain at least $1 billion in liquidity, although the company is unsure whether it will be able to meet that requirement. Questions for Jeffrey Campbell, AMR's cfo, were referred to a spokesperson, who did not return calls by press time.