US Bank files complaint against American refinancing

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US Bank has filed a complaint against AMR-subsidiary American Airlines' plan to refinance nearly $175 million in outstanding secured debt.

The trustee claims that the bankrupt airline is obligated to pay the make-whole amount on the debt as outlined in the original financing agreement because the proposed refinancing is voluntary, in a filing with the US Bankruptcy Court for the Southern District of New York on 7 November.

"Permitting a refinancing through a voluntary redemption without payment of a make-whole amount is inconsistent with the indenture's plain language and underlying logic," says US Bank, in the filing.

At question is the $174.2 million in outstanding principle on American's 2009-2 senior secured notes that closed on 31 July 2009. The originally $276 million seven-year debt pays a yield of 13%.

The debt is secured by nine Boeing 737-800, one Boeing 767-300ER and two Boeing 777-200ER aircraft, according to the US Bank filing.

American did not immediately respond to queries.

The airline filed a proposal with the court on 9 October to refinance the notes as part of a $1.5 billion senior secured equipment trust certificates (EETC) issue with maturities between two and nine years. The airline said that it needed to conclude the deal "as soon as possible" in order to take advantage of the low interest rates available in the EETC market.

Deutsche Bank Securities and Morgan Stanley would underwrite the new issue, and Wilmington Trustee would be trustee.