American Airlines 2006 Annual Report Download - page 68

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6. Indebtedness (Continued)
In November 2005, the New York City Industrial Development Agency issued facilities sublease revenue bonds
for John F. Kennedy International Airport to provide reimbursement to American for certain facility construction
and other related costs. The Company recorded the issuance of $775 million (net of $25 million discount) as
long-term debt on the consolidated balance sheet as of December 31, 2005. The bonds bear interest at fixed
rates, with an average effective rate of 8.06 percent, and mature over various periods of time, with a final maturity
in 2031. Proceeds from the offering are to be used to reimburse past and future costs associated with the
Company’s terminal construction project at JFK. As of December 31, 2006, the Company had received
approximately $645 million of the proceeds as reimbursements of certain facility construction and other related
costs. The remaining $139 million of bond issuance proceeds are classified as Other assets on the consolidated
balance sheet, of which $60 million are held by the trustee for reimbursement of construction costs and will be
available to the Company in the future, and $79 million are held in a debt service reserve fund.
During the year ended December 31, 2005, AMR Eagle borrowed approximately $319 million, net of discount,
under various debt agreements related to the purchase of regional jet aircraft. These debt agreements are
secured by the related aircraft, have effective interest rates ranging from 5.00 percent to 5.13 percent, are
guaranteed by AMR and mature over various periods of time through 2021.
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. These notes are guaranteed by
American. The 4.25 and 4.50 notes have become convertible into shares of AMR common stock, and as a
result the holders may convert their notes at anytime prior to maturity. The conversion, if it occurs, may be settled
by the Company in cash, common stock or a combination of cash and common stock. After February 15, 2009
and September 23, 2008, the Company may call all or any portion of the 4.50 Notes and 4.25 Notes, respectively,
for redemption. In such case, holders may elect to convert the notes into shares of AMR common stock, in which
cash settlement will occur as described above.
Certain debt is secured by aircraft, engines, equipment and other assets having a net book value of
approximately $13.1 billion as of December 31, 2006.
As of December 31, 2006, AMR has issued guarantees covering approximately $1.7 billion of American’s tax-
exempt bond debt and American has issued guarantees covering approximately $1.1 billion of AMR’s unsecured
debt. In addition, as of December 31, 2006, AMR and American have issued guarantees covering approximately
$388 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 $944 million, $828 million and $729 million for 2006,
2005 and 2004, respectively.