AMR and Embraer seek regional jet refinancing

Washington DC
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AMR subsidiary American Eagle Airlines has requested bankruptcy court approval to restructure $1.75 billion in debt on its entire fleet of Embraer regional jets.

The proposed deal includes the return of 18 E-135s, sale-leaseback of 21 E-135s and refinancing of 59 E-140s and 68 E-145s, according to a filing with the US Bankruptcy Court for the Southern District of New York on 9 October. Financing terms would stay the same on 50 E-145s.

The restructuring would reduce debt against the aircraft by 38% to $1.08 billion from $1.75 billion, according to the filing.

"The current mortgage financings for the aircraft are on unfavourable terms relative to the current market for financing of such aircraft," says the filing. "As a result of the proposed settlement, the debt and costs for the retained aircraft will be substantially reduced and comparable to current market rates."

AMR is working with Brazilian development bank BNDES and its FINAME division, as well as trustee BNY Mellon, on restructuring the debt.

The sale-leaseback for 21 E-135s would be with Embraer's leasing arm ECC Leasing with the leases terminating on various dates between 1 January 2013 to 1 December 2013, according to the filing. American Eagle would pay $40,000 per month for each aircraft.

The carrier could renew or retire the aircraft from its fleet, at the end of the leases.

American Eagle declines to comment on its future fleet plans.

The outstanding principal would be reduced by 49% on the E-140s and by 34% on the 58 E-145s, according to the filing.

American signed a capacity purchase agreement with SkyWest Inc subsidiaries SkyWest Airlines and ExpressJet Airlines to provide regional feed at its Los Angeles and Dallas-Fort Worth hubs, respectively, in September. The agreement covers 23 Bombardier CRJ200 aircraft.

American Eagle has 47 CRJ700s, 21 E-135s, 59 E-140s and 118 E-145s in its fleet, according to Flightglobal's Ascend Online database.