By Nick Brown
NEW YORK, Nov 8 (Reuters) - Hedge fund Marathon Asset
Management has withdrawn a request for an independent
investigator to examine the books of American Airlines, a unit
of bankrupt AMR Corp, lawyers for the companies said at a hearing
on Thursday.
The move came after AMR agreed to preserve potential
clawback claims relating to debt deals, struck between Marathon
and AMR, that left American Airlines with $2.26 billion of debt.
AMR entered bankruptcy last November, and is considering its
options for emerging either as a standalone firm or to merge
with smaller competitor US Airways Group, which is making an
aggressive takeover push.
Marathon, which has said it holds "well over" $100 million
of AMR debt, last month sought an examiner to probe intercompany
transactions consummated in the weeks before AMR's Chapter 11
filing. The deals transferred about $2.26 billion of debt from
AMR's American Eagle unit to American Airlines.
Marathon said in court papers it was concerned that
potential legal claims to claw the money back would be barred
under the language of a separate settlement, under which AMR
refinanced about 200 of its aircraft.
AMR dismissed that argument in court filings as an "obvious
litigation tactic." But on Thursday, it agreed to expressly
preserve such claims in exchange for Marathon dropping its
request for an examiner, AMR attorney Richard Hahn said at the
hearing in federal bankruptcy court in White Plains, N.Y..
The resolution also allows AMR to move forward with the
underlying aircraft refinancing deal, which it says will save
about $670 million on planes manufactured by Embraer.
Marathon has been taking a more vocal role in AMR's
bankruptcy, adding another layer of complexity to the already
multi-faceted case.
The examiner request was Marathon's second attempt to flex
its muscles as a significant creditor, coming days after it sent
a letter to AMR Chief Executive Tom Horton demanding more
transparency about the airline's restructuring efforts.
It remains unclear whether Marathon supports a standalone
restructuring or a US Airways merger, or whether Marathon would
be in a position to finance an independent exit from bankruptcy
for AMR. But as a large debtholder, the hedge fund could be in a
position to influence either scenario by objecting to plans it
does not support.
US Airways would like to acquire AMR out of bankruptcy,
while a group of debtholders including JPMorgan Chase & Co
has expressed interest in financing a standalone exit.
AMR received court permission at Thursday's hearing to
extend for 30 days, through Jan. 28, its unilateral control of
its bankruptcy exit plan. That means US Airways cannot propose
its own takeover plan until that date, and that any merger plan
before that date would have to be a cooperative effort with AMR.
Labor issues will also affect AMR's ability to emerge from
bankruptcy independently.
High labor costs were a driving force in the company's
bankruptcy filing, and while the airline has reached new
collective bargaining deals with its flight attendants' and
ground workers' unions, it remains at odds with its pilots.
That could spook investors assessing the company's stability
going forward, and AMR's creditors' committee has said labor
peace with pilots is a top priority.
While AMR and its pilots continue to negotiate, the pilots
have said they support a merger with US Airways. They have also
said they already have a tentative labor deal in place with US
Airways.
The case is In re AMR Corp et al, U.S. Bankruptcy Court,
Southern District of New York, No. 11-15463.
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