AA Borrowing To Meet Payroll

[FWAAA]

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On 1/21/2003 7:09:52 PM iflyjetz wrote:

Oeleson, interesting info. However, you forgot to include the amount of cash that a company needs on hand just to enter bankruptcy. U needed around $700 mil in cash, and UAL needed something north of $1 bil. That's due to the fact that no one's going to extend a company credit once the chap 11 filing occurs; no 60 day grace period.
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In my experience, companies have a really hard time borrowing money right before a filing - and somewhat easier time right after the filing, since the DIP financing has higher priority than funds extended immediately prior to a filing. Bank One lent UAL money right away with more promised if it can meet its cash flow targets.

That said, it's certainly a good idea not to spend your last dime right before you file Chapter 11; if you do, you might as well liquidate.

 

[iflyjetz]

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On 1/21/2003 8:52:09 PM FWAAA wrote:

In my experience, companies have a really hard time borrowing money right before a filing - and somewhat easier time right after the filing, since the DIP financing has higher priority than funds extended immediately prior to a filing. Bank One lent UAL money right away with more promised if it can meet its cash flow targets.

That said, it's certainly a good idea not to spend your last dime right before you file Chapter 11; if you do, you might as well liquidate.
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FWAAA, don't quote me on this, but I'm pretty sure that UAL had something north of $1 bil in cash going into chap 11. They also secured an additional $1.5 bil in DIP immediately after filing. I'm positive on the DIP financing number, but I don't know exactly how much cash they had going into chap 11.

 

[Oliver Stone''s Apprentice]

There are probably just as many reasons for selling Eagle as there are for not selling them, so I won't rule it out.

When you've seen two houses on your block go into foreclosure, you're probably a little more cautious about skipping your house payment. So, hopefully, AMR's unions and management aren't in the same state of denial that UA and US were in prior to their bankruptcy filings.

 

[Oliver Stone''s Apprentice]

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On 1/21/2003 7:09:52 PM iflyjetz wrote:

However, you forgot to include the amount of cash that a company needs on hand just to enter bankruptcy.

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You forgot to ask. AMR still has $2.7B in cash on-hand ($775M of it restricted).

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On 1/21/2003 7:09:52 PM iflyjetz wrote:

That's due to the fact that no one's going to extend a company credit once the chap 11 filing occurs;

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History says otherwise. It's actually easier in some ways to get credit once the filing occurs. Look at how much both UAL and US raised in DIP financing. Yes, there are some hefty restrictions associated with it, but they still raised a boatload of cash.

Plus, AMR still has access to the financial markets. According to the earnings webcast, AMR raised over $650M in cash back in December, and still has over $2.9B in unencumbered aircraft.

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On 1/21/2003 7:09:52 PM iflyjetz wrote:

With the info that you cite, I will stick with my expectation of CAL and AMR filing within the next 12 months unless the revenue situation improves in the airline industry.
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OK. I think you're wrong regarding AMR, though.

AMR is at least $1B away from getting to where UAL's cash position was when they filed, and AMR still has a lot of furniture left to burn before they drop below cash levels needed to survive a potential Ch.11 filing. They also have AMR Eagle to sell off if needed, which I'd expect before a bankruptcy filing.

 

[UnitedChicago]

I don't know that they'd sell Eagle to avoid CH11. Lessons learned from Pan Am, Braniff, Eastern, and TWA - don't sell assets if possible.

Stay as intact as possible and file CH11 with hopes of few major route or asset changes.

Another reason to avoid selling Eagle (aside from - who could afford to buy it? if so - it would be at a deep discount)...why bother trying to avoid CH11 through selling Eagle?

Unions can give concessions and lease holders can give concessions outside of CH11 - but they will never equal dollar for dollar what has and will be given up at UA and U.

Just look at what the UA "labor coalition" offered to keep UA out of CH11 and look what they've accepted now. And they stood to - and now will - lose their value of stock and their ownership.

Look how long the AA "labor coalition" has taken to even signal one way or the other whether or not they'll accept pay freezes?

Don Carty is in deep doo doo. What has he been doing? Did he not see this coming? He helped lobby Washington against a UA loan.

In the end...I think AA will barely avoid filing.

If any of you underestimate the situation, go read the UA board from the CH11 warning in August to present. AA board is sounding eerily familiar.

 

[UnitedChicago]

Duplicate...see below.

 

[UnitedChicago]

Well if Wing's post is any hint (paging Bob Owens-Lott) then happy landing in CH11.

Please don't make the media get "creative" with headlines yet again:

American lands in Bankruptcy
American joins United and US Airways on CH11 taxiway
Cleared for Bankruptcy: American files CH11

 

[WingNaPrayer]

Surely you jest? Most people's mortgages, AA employees included, are tied to their salaries, i.e., their ability to repay and their mortgage payments are tailored to the fact that the are able to pay specific amounts based on their pay. Now, if their wages/salaries get slashed, don't you think they'll end up in foreclosure even if they are still working?[BR][BR]You don't take slashed wages to save a company and end up in bankruptcy and/or foreclosure yourself for doing so.[BR][BR]Stay the course....NO concessions...NO givebacks!

 

[Oliver Stone''s Apprentice]

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On 1/22/2003 3:15:55 PM WingNaPrayer wrote:

Now, if their wages/salaries get slashed, don't you think they'll end up in foreclosure even if they are still working?

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Nope. You only end up in foreclosure if you spend more per month than you earn.

My wife was one of those furloughed late last year in management, so I think I can relate to this first hand a hel[span]l[/span] of a lot beter than you can as a self-proclaimed non-employee (which I doubt more and more every day...).

We knew what our mortgage and monthly expenses are, and we had at least three options when we lost my wife's paycheck:

1) Stop paying the mortgage (or other bills), and wait for foreclosure (collection notices)
2) Get another job (or a second job)
3) Cut as many other expenses as we can until we're living within our new income.

Fortunately, we'd cut back on expenses in advance, bracing for possible wage reductions six months ago. Anyone who hasn't already done so themself is a fool.

I've worked part-time jobs while also working for AMR, and there are more and more people who choose to do so.

Does any of this mean I'm in favor of pay cuts? Hardly. But you don't wait until your house burns down to buy insurance, either...

 

[WingNaPrayer]

I wonder if anyone in executive management has to work two jobs to make ends meet at home.[BR][BR]Fathom that!

 

[gogogadget]

This is rediculous! The ONLY way this would even make sense would be that EVERYthing is paid first and they leave the payroll until they have to apply funds to it last! AMR is borrowing to survive, not to make payroll!

This just makes good news and drama for the firestorm!

 

[Oliver Stone''s Apprentice]

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On 1/22/2003 8:12:10 PM gogogadget wrote:

This just makes good news and drama for the firestorm!

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Sort of like WNP's posts...

 

[AC AA LA FA]

As much as I agree that we at AA are seeing tough times...the whole "borrowing to meet payroll" thing is over the top...as said above..its all a numbers thing..
...we all got the point..now power back on the drama..and lets find a way out of this mess......