American Airlines 1999 Annual Report Download - page 33

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At December 31, 1999, the Company owned approximately
3.5 million depository certificates convertible, subject to certain
restrictions, into the common stock of Equant, which completed
an initial public offering in July 1998. As of December 31, 1999,
the estimated fair value of these depository certificates was
approximately $395 million, based upon the publicly traded
market value of Equant common stock. Of the 3.5 million
depository certificates owned by the Company as of December
31, 1999, approximately 2.3 million depository certificates,
with an estimated market value of approximately $259 million,
are held by the Company on behalf of Sabre.
On February 7, 2000, the Company declared its intent to
distribute AMR’s entire ownership interest in Sabre as a dividend
on all outstanding shares of its common stock. To effect the
dividend, AM R exchanged all of its 107,374,000 shares of Sabre’s
Class B common stock for an equal number of shares of Sabre’s
Class A common stock. Effective after the close of business on
March 15, 2000, AM R distributed 0.722652 shares of Sabre
Class A common stock for each share of AMR stock owned by
AMR’s shareholders. The record date for the dividend of Sabre
stock was the close of business on March 1, 2000. In addition, on
February 18, 2000, Sabre paid a special one-time cash dividend
of $675 million to shareholders of record of Sabre common stock
at the close of business on February 15, 2000. Based upon its
approximate 83 percent interest in Sabre, AM R received approxi-
mately $560 million of this dividend. These funds will be used for
general corporate purposes. The dividend of AMR’s entire owner-
ship interest in Sabre’s common stock resulted in a reduction to
AMR’s retained earnings in M arch of 2000 equal to the carrying
value of the Company’s investment in Sabre on March 15, 2000,
which approximated $600 million. The fair market value of AM R’s
investment in Sabre on M arch 15, 2000, based upon the quoted
market closing price of Sabre Class A common stock on the New
York Stock Exchange, was approximately $5.2 billion.
The Company’s March 15, 2000 distribution of its ownership
interest in Sabre represented a designated event, as defined,
under event risk covenants contained in agreements related to
certain indebtedness of the Company and American. Under
these covenants, the interest rate on such indebtedness will be
increased if, during a specified period following the occurrence of
a designated event, the credit rating of such indebtedness is
downgraded below certain levels. However, the Company has not
received indication that the credit rating on any such indebted-
ness will be downgraded. For additional information concerning
these event risk covenants, see Note 3 to the consolidated
financial statements.
American has a $1.0 billion credit facility agreement that
expires December 19, 2001. At American’s option, interest on the
agreement can be calculated on one of several different bases.
For most borrowings, American would anticipate choosing a
floating rate based upon the London Interbank Offered Rate
(LIBOR). At December 31, 1999, no borrowings were outstanding
under the agreement.
AMR (principally American Airlines) historically operates
with a working capital deficit as do most other airline companies.
The existence of such a deficit has not in the past impaired the
Company’s ability to meet its obligations as they become due and
is not expected to do so in the future.
OTHER I NFORMATION
Environmental Matters Subsidiaries of AMR have been notified
of potential liability with regard to several environmental cleanup
sites and certain airport locations. At sites where remedial litiga-
tion has commenced, potential liability is joint and several. AMR’s
alleged volumetric contributions at these sites are minimal. AMR
does not expect these matters, individually or collectively, to have