American Airlines 2004 Annual Report Download - page 64

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61
6. Indebtedness (Continued)
In 2004 the Company issued $324 million principal amount of its 4.50 percent senior convertible notes due 2024
(the 4.50 Notes) and in 2003 the Company issued $300 million principal amount of its 4.25 percent senior
convertible notes due 2023 (the 4.25 Notes). Each note is convertible into AMR common stock at a conversion
rate of 45.3515 shares for the 4.50 Notes and 57.61 shares for the 4.25 Notes, per $1,000 principal amount of
notes (which represents an equivalent conversion price of $22.05 per share for the 4.50 Notes and $17.36 per
share for the 4.25 Notes), subject to adjustment in certain circumstances. The notes are convertible under certain
circumstances, including if (i) the closing sale price of the Company’s common stock reaches a certain level for a
specified period of time, (ii) the trading price of the notes as a percentage of the closing sale price of the
Company’s common stock falls below a certain level for a specified period of time, (iii) the Company calls the
notes for redemption, or (iv) certain corporate transactions occur. Holders of the notes may require the Company
to repurchase all or any portion of the 4.50 Notes on February 15, 2009, 2014 and 2019 and 4.25 Notes on
September 23, 2008, 2013 and 2018 at a purchase price equal to the principal amount of the notes being
purchased plus accrued and unpaid interest to the date of purchase. The Company may pay the purchase price in
cash, common stock or a combination of cash and common stock. After February 15, 2009 and September 23,
2008, the Company may redeem all or any portion of the 4.50 Notes and 4.25 Notes, respectively, for cash at a
price equal to the principal amount of the notes being redeemed plus accrued and unpaid interest as of the
redemption date. These notes are guaranteed by American. If the holders of the 4.50 Notes or the 4.25 Notes
require the Company to repurchase all or any portion of the notes on the repurchase dates, it is the Company’s
present intention to satisfy the requirement in cash.
In 2003, American transferred its two headquarters buildings located in Fort Worth, Texas to AA Real Estate
Holding L.P., a wholly owned consolidated subsidiary of American. This entity leased the buildings back to
American pursuant to a triple-net lease, and used the buildings and the lease as security for a loan consisting of
four notes, in the amount of $98 million (net of discount of $2 million), which is reflected as debt in the
accompanying consolidated balance sheet of the Company. Each note corresponds to a separate class of AA/Ft.
Worth HQ Finance Trust Lease Revenue Commercial Mortgage-Backed Pass-Through Certificates, Series 2003
(the Certificates) issued by the AA/Ft. Worth HQ Finance Trust, which is not a subsidiary of American, in a private
placement pursuant to Rule 144A under the Securities Act of 1933. The Certificates and corresponding notes
have an average effective interest rate of 7.2 percent and a final maturity in 2010.
In 2002, the Regional Airports Improvement Corporation and the New York City Industrial Development Agency
issued facilities sublease revenue bonds at the Los Angeles International Airport and John F. Kennedy
International Airport, respectively, to provide reimbursement to American for certain facility construction and other
related costs. The Company has recorded the total amount of the issuances of $759 million (net of $38 million
discount) as long-term debt on the accompanying consolidated balance sheet as of December 31, 2002. These
obligations bear interest at fixed rates, with an average effective rate of 8.5 percent, and mature over various
periods of time, with a final maturity in 2028.
Certain debt is secured by aircraft, engines, equipment and other assets having a net book value of approximately
$14.0 billion as of December 31, 2004.
As of December 31, 2004, AMR has issued guarantees covering approximately $928 million of American’s tax-
exempt bond debt and American has issued guarantees covering approximately $1.3 billion of AMR’s unsecured
debt. In addition, as of December 31, 2004, AMR and American have issued guarantees covering approximately
$466 million of AMR Eagle’s secured debt, and AMR has issued guarantees covering an additional $2.6 billion of
AMR Eagle’s secured debt.
Cash payments for interest, net of capitalized interest, were $729 million, $661 million and $564 million for 2004,
2003 and 2002, respectively.