AMR Creditor Drops Request for Debt Investigation

by San Antonio Attorney

Marathon Asset Management dropped its request for an independent investigation on the books of American Airlines.

AMR, which left American Airlines with more than $2 billion of debt, reached a deal with Marathon not to discard future clawback claims related to debt deals in exchange for withdrawing their request for an investigation.

AMR filed for bankruptcy last year, and is looking to exit either as a standalone company or to merge with US Airways Group.

AMR owes more than $100 million to Marathon, which sought to probe intercompany transactions that took place within the weeks before the Chapter 11 filing of AMR.

Based on court papers filed, Marathon was concerned that future legal claims to take the money back would be shunned because of the language of another settlement, where AMR refinanced around 200 of its planes.

AMR argued that Marathon was using it as a litigation tactic, but then it agreed to specifically preserve the clawback claims on Thursday,  based on what AMR’s attorney Richard Hahn said at a federal bankruptcy court hearing.

The deal will also allow AMR to proceed with the main refinancing agreement, which will save the company $670 million on aircraft made by Embraer.

Marathon’s request for an independent examiner was its latest effort to show that it is a major creditor. The move was made after it demanded from AMR to be more transparent in its restructuring plan.

It is still uncertain whether Marathon supports a standalone reorganization or a merger with U.S. Airways. But since the hedge fund is a major debtholder, it could be capable of influencing the end result by opposing to options it does not agree with.

US Airways wants to merge with AMR, while a group of debtholders is interested in financing the company in a standalone bankruptcy exit.

 

– Filing Chapter 11 can give a financially troubled company ample time to recover profitability. A business should consider if the amount of money paid for attorney’s fees throughout a reorganization warrants the financial risk. For this reason, the options of a business owner should be evaluated by a Bankruptcy Lawyer San Antonio, especially if there are concerns in separating personal and business accounts.

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