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PilotAction Merger News for US Airways & American Airlines #5: August 29, 2013
Judge to Consider Date for Airline-Antitrust Trial - AMR's Stay in Bankruptcy Is Tied to Trial's Outcome
CHICAGO (WSJ.com) - A federal judge will consider on Friday one of the most contentious issues so far in the Justice Department's challenge to the merger between American Airlines parent AMR Corp. and US Airways Group Inc. the antitrust trial's start date.
The parties have asked U.S. District Judge Colleen Kollar-Kotelly to set the timing during a scheduling conference, a decision that is under exceptional scrutiny because AMR's stay in bankruptcy is tied to the trial's outcome.
If Judge Kollar-Kotelly begins the trial around Nov. 12, as the airlines have requested, they will almost certainly face off against the government in court. But if the judge sides with the government, which has requested the trial start March 3, AMR will have to decide whether to stay mired in bankruptcy for several more months with no guarantee the deal will succeed, or to pursue a stand-alone plan. A delay to next year would also mean the airlines no longer would be bound by hefty breakup fees in their merger agreement that expire in December.
On Thursday, the judge overseeing AMR's bankruptcy again delayed a ruling on its reorganization plan to merge with US Airways. The judge said he is leaning toward confirming the plan but wanted to hear more from AMR and its creditors on how the Justice Department's suit affects the bankruptcy. He scheduled the next hearing for Sept. 12.
AMR and US Airways have stood by the deal, but in a court filing this week they said that starting the antitrust trial in 2014 would jeopardize the merger by casting months of uncertainty over it. The airlines said that, for example, the delay would impede their negotiations for important corporate contracts and limit AMR's ability to finance new aircraft. And an extended wait could also be costly: AMR said that if the case wasn't tried until April or May, it would incur an additional $65 million to $75 million in bankruptcy-related fees.
The government's proposed start date "presents a significant risk that the schedule rather than the merits will determine the future of the planned transaction," they said. "Two independent companies can be asked to stay in limbo for only so long before they need to make independent plans."
An AMR spokesman said that if the trial is scheduled for 2014, the airlines would still plan to defend the merger in court, but the uncertainty could allow an outside event, such as a spike in oil prices, to cause the airlines to later abandon the deal.
AMR's creditors also said in a court filing that the delay would threaten the merger. The deal is predicated on complex intercreditor agreements and "prolonged uncertainty…could undermine these compromises and instead precipitate factiousness and infighting," they said.
The Justice Department says it needs time to prepare its case arguing that the merger would hurt airline competition and "likely result in hundreds of millions of dollars in harm to consumers annually." The government said there should be no urgency to start the trial because AMR and US Airways are doing well financially. AMR reported that it earned $292 million in July.
The airlines, which say the merger would benefit consumers, said the government has had more than 16 months to investigate the deal. The government said that time wasn't used to prepare for trial.
The parties said this week that they remain open to a settlement. However, the government said it had not yet received a proposal "that addresses the competitive harms posed by the merger," while the airlines said that they have already tried to settle and that "there ought to be a realistic possibility of a settlement."
The merger deal requires AMR to pay $135 million if it leaves the deal before a deadline in mid-December. It says US Airways would have to pay a breakup fee of $55 million. Each also faces a $195 million fee if they knowingly breach the merger terms. To extend the merger agreement past that deadline, both airlines must agree.
The Deal: Deal: Airline Merger Judge Wants Details
In an order issued Thursday, Kollar-Kotelly appeared to be favoring a trial date on the earlier side. She called on the parties to "immediately begin serving written discovery to the extent possible."
See Story: http://www.thestreet.com/story/12022...o&cm_ven=YAHOO
US Airways-American Merger Not Dead
See Story: http://wallstcheatsheet.com/stocks/u...p.html/?ref=YF
Judge to Consider Date for Airline-Antitrust Trial - AMR's Stay in Bankruptcy Is Tied to Trial's Outcome
CHICAGO (WSJ.com) - A federal judge will consider on Friday one of the most contentious issues so far in the Justice Department's challenge to the merger between American Airlines parent AMR Corp. and US Airways Group Inc. the antitrust trial's start date.
The parties have asked U.S. District Judge Colleen Kollar-Kotelly to set the timing during a scheduling conference, a decision that is under exceptional scrutiny because AMR's stay in bankruptcy is tied to the trial's outcome.
If Judge Kollar-Kotelly begins the trial around Nov. 12, as the airlines have requested, they will almost certainly face off against the government in court. But if the judge sides with the government, which has requested the trial start March 3, AMR will have to decide whether to stay mired in bankruptcy for several more months with no guarantee the deal will succeed, or to pursue a stand-alone plan. A delay to next year would also mean the airlines no longer would be bound by hefty breakup fees in their merger agreement that expire in December.
On Thursday, the judge overseeing AMR's bankruptcy again delayed a ruling on its reorganization plan to merge with US Airways. The judge said he is leaning toward confirming the plan but wanted to hear more from AMR and its creditors on how the Justice Department's suit affects the bankruptcy. He scheduled the next hearing for Sept. 12.
AMR and US Airways have stood by the deal, but in a court filing this week they said that starting the antitrust trial in 2014 would jeopardize the merger by casting months of uncertainty over it. The airlines said that, for example, the delay would impede their negotiations for important corporate contracts and limit AMR's ability to finance new aircraft. And an extended wait could also be costly: AMR said that if the case wasn't tried until April or May, it would incur an additional $65 million to $75 million in bankruptcy-related fees.
The government's proposed start date "presents a significant risk that the schedule rather than the merits will determine the future of the planned transaction," they said. "Two independent companies can be asked to stay in limbo for only so long before they need to make independent plans."
An AMR spokesman said that if the trial is scheduled for 2014, the airlines would still plan to defend the merger in court, but the uncertainty could allow an outside event, such as a spike in oil prices, to cause the airlines to later abandon the deal.
AMR's creditors also said in a court filing that the delay would threaten the merger. The deal is predicated on complex intercreditor agreements and "prolonged uncertainty…could undermine these compromises and instead precipitate factiousness and infighting," they said.
The Justice Department says it needs time to prepare its case arguing that the merger would hurt airline competition and "likely result in hundreds of millions of dollars in harm to consumers annually." The government said there should be no urgency to start the trial because AMR and US Airways are doing well financially. AMR reported that it earned $292 million in July.
The airlines, which say the merger would benefit consumers, said the government has had more than 16 months to investigate the deal. The government said that time wasn't used to prepare for trial.
The parties said this week that they remain open to a settlement. However, the government said it had not yet received a proposal "that addresses the competitive harms posed by the merger," while the airlines said that they have already tried to settle and that "there ought to be a realistic possibility of a settlement."
The merger deal requires AMR to pay $135 million if it leaves the deal before a deadline in mid-December. It says US Airways would have to pay a breakup fee of $55 million. Each also faces a $195 million fee if they knowingly breach the merger terms. To extend the merger agreement past that deadline, both airlines must agree.
The Deal: Deal: Airline Merger Judge Wants Details
In an order issued Thursday, Kollar-Kotelly appeared to be favoring a trial date on the earlier side. She called on the parties to "immediately begin serving written discovery to the extent possible."
See Story: http://www.thestreet.com/story/12022...o&cm_ven=YAHOO
US Airways-American Merger Not Dead
See Story: http://wallstcheatsheet.com/stocks/u...p.html/?ref=YF
