SEC Filing Summary: AMR Corporation (Form 8-K)
Business Context and Reporting Period
This Current Report on Form 8-K was filed by AMR Corporation (parent of American Airlines, Inc.) on May 16, 2008, regarding events occurring on May 15, 2008. The filing details an amendment to the company's existing Amended and Restated Credit Agreement dated March 27, 2006.
Key Financial Metrics and Debt Structure
The filing does not provide specific revenue, profit, or cash flow figures for the reporting period. However, it outlines the following debt facilities under the Credit Agreement:
- Revolving Credit Facility: $255 million (undrawn), maturing June 17, 2009.
- Term Loan Facility: $440 million (fully drawn), maturing December 17, 2010.
- Covenant Metric: The agreement requires a minimum ratio of cash flow (EBITDAR) to fixed charges.
Material Changes Versus Prior Period
AMR Corporation and American Airlines, Inc. entered into an amendment to the Credit Agreement on May 15, 2008, resulting in the following material changes to financial covenants:
- Covenant Waiver: Compliance with the EBITDAR Covenant was irrevocably waived for all periods ending from June 30, 2008, through March 31, 2009.
- Revised Minimum Ratios: The required EBITDAR to fixed charges ratio was significantly reduced for future periods compared to the original agreement:
| Period Ending | Original Minimum Ratio | Revised Minimum Ratio |
|---|---|---|
| June 30, 2008 | 1.40:1.00 | Waived |
| September 30, 2008 | 1.40:1.00 | Waived |
| December 31, 2008 | 1.40:1.00 | Waived |
| March 31, 2009 | 1.40:1.00 | Waived |
| June 30, 2009 | 1.50:1.00 | 0.90:1.00 |
| September 30, 2009 (2 quarters) | N/A | 0.95:1.00 |
| December 31, 2009 (3 quarters) | N/A | 1.00:1.00 |
| March 31, 2010 (4 quarters) | N/A | 1.05:1.00 |
| June 30, 2010 (4 quarters) | N/A | 1.10:1.00 |
| September 30, 2010 (4 quarters) | N/A | 1.15:1.00 |
Outlook, Risks, and Unusual Items
Management Commentary and Fees: The company paid certain fees to lenders and arrangers (Citicorp USA, Inc., JPMorgan Chase Bank, N.A., Citigroup Global Markets Inc., and J.P. Morgan Securities Inc.) in connection with obtaining the amendment. No other changes to the Credit Agreement were effected.
Risks and Contingencies: The necessity of waiving and lowering the EBITDAR covenant suggests the company faced or anticipated difficulty in meeting its original financial performance targets. The filing notes that lenders and their affiliates continue to provide investment banking and financing services to the company.
Key Facts for Investor Verification
- Verify the company's actual EBITDAR performance for the trailing twelve months ending March 31, 2008, to understand the severity of the covenant breach risk.
- Confirm the total amount of fees paid to lenders for the covenant waiver and amendment.
- Review the full text of Exhibit 99.1 (Amendment No. 2) for any additional conditions or restrictions not summarized in the 8-K.
- Monitor the company's ability to meet the new, lower covenant thresholds starting June 30, 2009.