US Airways to Become More Involved in AMR’s Bankruptcy

On July 12, 2012, US Airways announced to the Associated Press that it is now a creditor of AMR.  US Airways spokesman, John McDonald, said his airline paid $600,000 for AMR bonds with a face value of $1 million.

While purchasing a claim does qualify US Airways as a party in interest, with a right to be heard on any issue in the bankruptcy case, see section 1109 of the Bankruptcy Code, the new million dollar claimant will have to stand in a long-line of interested parties who are actively monitoring AMR’s case.  The gesture of purchasing such claim may be more symbolic that US Airways is sincerely interested in exploring merger options, rather than any real threat to disrupt the bankruptcy proceedings if AMR does not follow through with recent announcements of exploring merger options (as discussed in an earlier submission). 

As part of its new status as a creditor, US Airways announced this Thursday that it did not oppose AMR’s request to extend the exclusive period of time to file a plan of reorganization.  Pursuant to section 1121(d)(1) of the Code, while a debtor in bankruptcy is, by default, given 120 days after filing bankruptcy to submit a plan, the debtor may ask for an extension of such exclusive period for up to 18 months after filing.  After the exclusive period ends, however, any party interest, including a creditor, can file a plan.  See 11 U.S.C. § 1121(c).   Predominant wisdom maintains that there is little, or no, chance that AMR will not submit a reorganization plan before the exclusive period lapses.