American Airlines 2006 Annual Report Download - page 34

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30
LIQUIDITY AND CAPITAL RESOURCES
Cash, Short-Term Investments and Restricted Assets
At December 31, 2006, the Company had $4.7 billion in unrestricted cash and short-term investments and $468
million in restricted cash and short-term investments.
Significant Indebtedness and Future Financing
Substantial indebtedness is a significant risk to the Company as discussed in the Risk Factors listed in Item 1A.
During 2004, 2005 and 2006, in addition to refinancing its Credit Facility and certain debt with an institutional
investor (see Note 6 to the consolidated financial statements), the Company raised an aggregate of
approximately $3.2 billion of financing to fund capital commitments (mainly for aircraft and ground properties),
operating losses, debt maturities, and employee pension obligations, and to bolster its liquidity. As of the date of
this Form 10-K, the Company believes that it should have sufficient liquidity to fund its operations for the
foreseeable future, including repayment of debt and capital leases, capital expenditures and other contractual
obligations. However, to maintain sufficient liquidity as the Company has significant debt, lease and other
obligations in the next several years, as well as substantial pension funding obligations (refer to Contractual
Obligations in this Item 7), the Company may need access to additional funding. The Company also continues to
evaluate the economic benefits and other aspects of replacing some of the older aircraft in its fleet prior to 2013.
The Company’s possible financing sources primarily include: (i) a limited amount of additional secured aircraft
debt (a very large majority of the Company’s owned aircraft, including virtually all of the Company’s Section 1110-
eligible aircraft, are encumbered) or sale-leaseback transactions involving owned aircraft, (ii) debt secured by
new aircraft deliveries, (iii) debt secured by other assets, (iv) securitization of future operating receipts, (v) the
sale or monetization of certain assets, (vi) unsecured debt and (vii) issuance of equity and/or equity-like
securities. However, the availability and level of these financing sources cannot be assured, particularly in light of
the Company’s and American’s recent financial results, substantial indebtedness, reduced credit ratings, high fuel
prices, revenues that are weak by historical standards, and the financial difficulties being experienced in the
airline industry. The inability of the Company to obtain additional funding on acceptable terms could have a
material adverse impact on the Company and on the ability of the Company to sustain its operations over the
long-term.
Credit Ratings
AMR’s and American’s credit ratings are significantly below investment grade. Additional reductions in AMR's or
American's credit ratings could further increase its borrowing or other costs and further restrict the availability of
future financing.
Credit Facility Covenants
American has a fully drawn $740 million credit facility which consists of a fully drawn $295 million senior secured
revolving credit facility, with a final maturity on June 17, 2009, and a fully drawn $445 million term loan facility,
with a final maturity on December 17, 2010 (the Revolving Facility and the Term Loan Facility, respectively, and
collectively, the Credit Facility). American’s obligations under the Credit Facility are guaranteed by AMR.