Reuters: Bankruptcy News: AMR needs standalone bankruptcy plan - adviser

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AMR needs standalone bankruptcy plan - adviser Apr 25th 2012, 20:16 Wed Apr 25, 2012 4:16pm EDT * Financial adviser says AMR needs own restructuring proposal * Says AMR can compare merger offers vs standalone plan * AMR's primary unions support merger with US Airways By Nick Brown NEW YORK, April 25 (Reuters) - A financial adviser to the bankrupt parent of American Airlines said on Wednesday the company needs to form a standalone restructuring plan, even if it may ultimately consider a merger with another airline. Rothschild Inc Managing Director David Resnick made the statement after being pressed by AMR's unions to acknowledge the projected value of their proposal last week to merge AMR Corp and US Airways. Testifying in a court hearing over the fate of AMR's labor contracts, Resnick conceded that AMR has a fiduciary duty to creditors to consider all options to maximize recoveries. But the company also needs to formulate a standalone restructuring plan, he said. "In my view, it makes no sense to put all your eggs in one basket, to pursue one alternative without looking at an array of options," Resnick said during testimony in U.S. Bankruptcy Court in Manhattan. "The base case against which to compare alternatives is a standalone plan. Then, from there, you can compare other options." US Airways President Scott Kirby said on a conference call on Wednesday that a merger with AMR could create "a tremendous amount" of value. AMR's unions said last week said such a merger could save thousands of jobs. AMR declared bankruptcy in November as it struggled with high labor costs. It has said it needs savings of $1.25 billion a year from its workforce, including $990 million from its unions. Resnick testified that the cuts are necessary to ensure AMR access to capital markets and gain high credit ratings, which are needed to fund a broad business plan that involves expanding its aircraft fleet and focusing on international markets. The alternative of a merger has been front-and-center since last week, when the company's three primary unions, representing its pilots, flight attendants and ground workers, said they had struck a deal with US Airways that could save more than 6,000 jobs. AMR CEO Tom Horton told employees in a letter on Monday that the agreement would not pull AMR off its pursuit of a standalone restructuring. THE FATE OF LABOR CONTRACTS Resnick's testimony came on the third day of an ongoing hearing over AMR's request to abandon its collective bargaining agreements and impose unilateral labor terms. AMR made the request after reaching a crossroads in negotiations with its unions, which have said the concessions asked of them are unfair. The unilateral terms would govern while the sides try to get past the roadblock and hash out an agreement. To have its request granted by Judge Sean Lane, AMR must prove not only that its unions have unreasonably shunned prior negotiation efforts, but that it has explored alternatives to avoid the drastic measure. The latter point has become a central theme, with union attorneys grilling witnesses over whether AMR sufficiently considered the alternative of a merger. A lawyer for AMR's flight attendants' union also held Resnick's feet to the fire on Wednesday on whether he believed the proposed labor cuts are the "absolute minimum" necessary for AMR to survive. Resnick resisted answering, saying the figure represented the minimum necessary for AMR to be viable, not merely survive. When pressed, he conceded that he had not been privy to any version of the plan that contemplated fewer labor cuts. LONG WAY TO GO Already four witnesses, including AMR's restructuring head, Bev Goulet, have testified. The hearing is expected to last through Friday. Judge Lane will not issue a ruling right away. When the hearing ends, the company and its unions will have two weeks to try to negotiate consensual deals. The Transport Workers Unions, which represents 26,000 ground workers at AMR, plans to send the business plan to its members for a vote, sources have told Reuters. If the 2-week window lapses without new deals, the unions in May will have a chance to present their case in court. Judge Lane would then be expected to issue a ruling in June. The sides still must ultimately attempt to reach consensual deals. If granted, the unilateral terms would be imposed in the interim. The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463. Link this Share this Digg this Email Reprints

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