AMR says hedge funds may provide equity financing

NEW YORK Aug 29 (Reuters) - The parent of American Airlines said on Wednesday a group of hedge funds was interested in providing equity financing to help it emerge from bankruptcy, with Dow Jones reporting the funds could contribute up to $2 billion.

AMR Corp asked the U.S. Bankruptcy Court in New York for permission to pay the fees for a group of bondholders' attorneys and financial advisors as they considered whether to provide financing.

"The engagement of the Group presents a reasonable prospect of obtaining commitments that may facilitate the reorganization efforts," AMR said in a filing.

The group includes an affiliate of J.P. Morgan Chase as well as Carlson Capital, Cyrus Capital Partners and Claren Road Asset Management, among others.

The group was considering $1 billion to $2 billion in equity financing and could provide enough to allow AMR to exit bankruptcy on its own, Dow Jones reported, citing three unnamed people involved with the matter.

That could give AMR more leverage as it explores a possible merger with US Airways Group Inc, two of the people told Dow Jones.

The funds hold more than $600 million in AMR bonds, Dow Jones said.

A hearing to determine whether AMR should be allowed to pay the fees was set for Sept. 20.

AMR is seeking to pay the hourly costs for law firm Milbank, Tweed, Hadley & McCloy as well as a monthly fee of $150,000 to Houlihan Lokey Howard & Zukin, the financial firm advising the group of creditors.

In a letter from the creditors to AMR that was included in the filing, the group said it was not committing to providing any financing.

"It is not at all unusual for large debt holders to express an interest in participating in the formulation of a plan of reorganization and to potentially provide equity or other financing as part of a plan," said Sean Collins, an American Airlines spokesman.

"It also is not uncommon for the debtor to pay fees related to this effort."

AMR filed for Chapter 11 protection in November.

The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.