American Airlines 2009 Annual Report Download - page 67

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6. Indebtedness (Continued)
Pursuant to the Advance Purchase, Citibank has been granted a first-priority lien in certain of American’s
AAdvantage program assets, and a lien in certain of American’s Heathrow and Narita routes and slots that would
be subordinated to any subsequent first lien. Commencing on December 31, 2011, American has the right to
repurchase, without premium or penalty, any or all of the Advance Purchase Miles that have not then been posted
to Citibank cardholders’ accounts. American is also obligated, in certain circumstances (including certain specified
termination events under the Amended Participation Agreement, certain cross defaults and cross acceleration
events, and if any Advance Purchase Miles remain at the end of the term) to repurchase for cash all of the
Advance Purchase Miles that have not then been used by Citibank.
The Amended Participation Agreement includes provisions that grant Citibank the right to use Advance Purchase
Miles on an accelerated basis under specified circumstances. American also has the right under certain
circumstances to release, or substitute other comparable collateral for, the Heathrow and Narita route and slot
related collateral.
Approximately $890 million of the Advance Purchase proceeds is accounted for as a loan from Citibank, with the
remaining $110 million related to certain other commitments with respect to the co-branding relationship and
recorded as Deferred revenue in Other liabilities and deferred credits. The loan was determined using an effective
interest rate of 8.3 percent and will be amortized under the interest method with imputed interest included in
Interest expense. The deferred revenue will be amortized straight line over the life of the agreement.
Also on September 16, 2009, American entered into two financing transactions with GECAS. The financing
transactions consist of (1) the 2009 Loan Facility in the amount of $282 million to be secured by 13 owned
assorted Boeing aircraft; and (2) Sale leaseback financing provided by GECAS for Boeing 737-800 aircraft (the
2009 Sale Leaseback) scheduled to be delivered in 2010 and 2011 for an aggregate commitment of $1.6 billion.
The 2009 Loan Facility bears interest at LIBOR plus a specified margin and will mature on September 16, 2017.
The terms of the 2009 Sale Leaseback are based on previous transactions with GECAS. The 2009 Sale
Leaseback is subject to certain terms and conditions, including a condition to the effect that, at the time of
entering into the sale and leaseback of a particular Boeing 737-800 aircraft, American has at least a certain
amount of unrestricted cash and short term investments. See Note 5 to the consolidated financial statements.
As a condition to entering into the 2009 Loan Facility and the 2009 Sale Leaseback, American entered into certain
cross-default and cross-collateralization arrangements for the benefit of GECAS involving, among other things,
the 2009 Loan Facility, the 2009 Sale Leaseback and certain previously-existing debt and lease financings
involving GECAS with respect to more than 50 aircraft.
On September 28, 2009, the Company issued $460 million principal amount of its 6.25 percent senior convertible
notes due 2014. Each note is convertible by holders into shares of AMR common stock at an initial conversion
rate of 101.0101 shares per $1,000 principal amount of notes (which represents an equivalent initial conversion
price of approximately $9.90 per share), subject to adjustment upon the occurrence of certain events, at any time
prior to the close of business on the business day immediately preceding the maturity date of the notes. The
Company must pay the conversion price of the notes in common stock. If the holders of the notes do not convert
prior to maturity, the Company will retire the debt in cash. These notes are guaranteed by American.
On October 9, 2009, American completed the offering of $450 million aggregate principal amount of its 10.5
percent senior secured notes due 2012 (the Senior Notes) which are guaranteed by AMR. The Senior Notes are
secured by certain of American’s aircraft, and proceeds from the offering of the notes were used to refinance
American’s $432 million term loan credit facility which had a scheduled maturity of December 17, 2010 and which
was retired early on September 28, 2009.
In addition to the transactions described above, during the year ended December 31, 2009, the Company raised
approximately $320 million under other loans secured by various aircraft. The loans generally bear interest at a
LIBOR-based variable rate with a fixed margin which resets quarterly and are due in installments through 2019.
Almost all of the Company’s aircraft assets (including aircraft eligible for the benefits of Section 1110 of the U.S.
Bankruptcy Code) are encumbered.
Cash payments for interest, net of capitalized interest, were $631 million, $685 million and $861 million for 2009,
2008 and 2007, respectively.