AMR shareholders to receive rare value from Chapter 11

Thu Feb 14, 2013 8:43pm EST

Feb 14 (Reuters) - Shareholders of American Airlines parent AMR Corp may end up with a stake worth about $400 million in a combined American Airways/US Airways after the two companies announced a merger, a rare win for a company coming out of bankruptcy.

AMR, which filed for bankruptcy in November 2011, said on Thursday that it will merge with US Airways Group in an $11 billion all-stock deal, forming the world's biggest air carrier.

"It is unusual in Chapter 11 cases - and unprecedented in recent airline restructurings - for shareholders to receive meaningful recoveries," American Chairman and Chief Executive Tom Horton said in Thursday's merger announcement.

The widely expected merger must receive court approval, which the company hopes to attain late next month, an AMR lawyer said at a bankruptcy court hearing on Thursday. AMR would then construct a bankruptcy restructuring plan that would incorporate the merger, which would also need court and creditor approval.

AMR said its shareholders stand to recover at least a 3.5 percent ownership stake in the new airline. Jack Butler, an attorney for AMR's creditor committee, said on Thursday that the value of that stake was between $350 million and $400 million.

The day before AMR filed for Chapter 11 protection, its shares closed at $1.62, bringing its market capitalization to roughly $542 million. The $400 million, while short of that amount, is significant given the rarity of shareholders recovering value in bankruptcy.

The day of the airline's filing, Nov. 29, 2011, its shares closed at 26 cents, bringing the market cap to about $87 million, based on about 335 million shares outstanding.

AMR shares, which have been rising in recent months on expectations of the US Airways merger, jumped 63 percent on Thusday to close at $2.12.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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