A significant group of financial creditors of bankrupt American Airlines said it would support a stand-alone carrier after bankruptcy only if there were to be a new board of directors - and key stakeholders, including labor, were part of the selection.
The group laid out its position in a letter to American pilots' union president Keith Wilson made public to 8,000 members of the Allied Pilots Association (APA) on Wednesday.
The 12 creditors, represented by the law firm Milbank, Tweed, Hadley & McCoy, said that as "material" stakeholders "we intend to be one of the primary negotiators of any plan of reorganization."
The group includes Pentwater Capital Management, Claren Road Asset Management, Cyrus Capital Partners, and J.P. Morgan Securities. They own $885 million in bonds and other debt, according to a September court filing.
American prefers to exit bankruptcy as an independent carrier, but the letter could make it harder for the current management, led by CEO Tom Horton, to keep its jobs.
American's pilots, flight attendants, and mechanics support a merger with US Airways Group - and new management, led by US Airways CEO Doug Parker.
The pilots' union, in a posting on its website, said that while the creditors' letter referred only to a stand-alone reorganization plan, "it should not be interpreted as an endorsement" of that choice or a merger.
The creditors' commitment to work with the other stakeholders "shows that APA's 13.5 percent equity claim is of critical importance in shaping what the new American Airlines will look like and who will lead it," the union said.
The pilots will have a 13.5 percent equity stake in American if members ratify a proposed contract next Friday.
The creditors' letter advised that the process for selecting a new board of directors will include "input from those who will own significant shares of the equity of the reorganized entity and to be comprised of individuals mostly without prior affiliation with the company."
That board will select a management team to lead the company and determine "the optimal strategic plan for the airline," lawyer Gerard Uzzi wrote. "An important criteria for selecting a leader of that team will be a demonstrated ability to maximize shareholder value."
Vicki Bryan, analyst with the independent bond-research firm Gimme Credit, wrote in a client note that while the bondholder group holds a "comparatively small" stake in American's overall $8 billion in debt, stakeholders might listen.
"It is possible that this group could actually be planning to replace the board with members favorable to an American merger, enabling it to facilitate a more promising and timely resolution to the airline's troubles and get a piece of equity that might actually have convincing upside potential," she wrote.
"We long have argued that American's existing plan is essentially the same failed strategy that drove the company to failure over the past decade. We remain convinced that the best solution for American is to be run by someone else, and the best candidate in our view still is US Airways."
US Airways and American have been sharing confidential financial information, under terms of a nondisclosure agreement. Each laid out its case to the official unsecured-creditors committee.
American filed for bankruptcy protection last November, seeking to reduce costs.
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