US Airways Group on Friday seized an opportunity to influence bankruptcy proceedings for potential merger target American Airlines by buying $1 million worth of parent AMR Corp.'s debt.
US Airways, which has a hub in Charlotte and a reservations center in Winston-Salem, paid $630,000 to buy AMR's 6.25 percent notes due in October 2014 and become a creditor in the bankruptcy, the Tempe, Ariz.-based airline said.
News of the purchase followed American's statement that the airline is ready to consider strategic alternatives, including a possible merger, to its plan to exit bankruptcy as a stand-alone company.
As a creditor, US Airways gains the right to show up at bankruptcy hearings, comment on issues before the judge and file documents in the court record, said Ivan Kallick of Manatt, Phelps & Phillips and other bankruptcy lawyers.
Doug Parker, CEO of US Airways, has said he wants to merge with American, although a formal bid hasn't been made.
"Parker is saying, 'Now there is no way you can lock me out,'?" said Anthony Sabino, co-founder of New York-based Sabino & Sabino law firm. "?'Now we'll know every step, from things of great magnitude to the ridiculously trivial.' ? The timing is exquisite."
A combination of American, now the third-biggest U.S. carrier, and No. 5 US Airways would create the world's largest airline, surpassing current leader United Continental, based on miles flown by paying passengers.
US Airways acknowledged purchasing the debt in a court filing. In that filing it also supported an American request that U.S. Bankruptcy Judge Sean Lane extend to the end of this year its exclusive right to submit a reorganization plan.
The motion, supported by the creditors committee, is set for a hearing Wednesday.
"US Airways' filing in court is a meaningless ploy to garner publicity," said American spokesman Bruce Hicks. "US Airways admits they own a very small amount of debt, which gives them no special position with the court or in this process." The $1 million held by US Airways compares with $29.6 billion in total debt that AMR listed in its Chapter 11 filing.
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