Marathon wants examiner to investigate AMR intercompany transactions

By Caroline Salls

Pittsburgh, Oct. 23 - AMR Corp. claimant fund and account manager Marathon Asset Management, LP has asked the U.S. Bankruptcy Court for the Southern District of New York to order appointment of an examiner to investigate intercompany transactions that occurred in the months immediately before the AMR debtors filed for bankruptcy, according to a Tuesday court filing.

Specifically, Marathon said an examiner should be appointed to investigate the intercompany transactions that occurred among American Eagle Airlines, Inc., American Airlines, Inc. and AMR in the months leading up to the bankruptcy filing.

Marathon said an examiner should also investigate any claims or other rights the AMR debtors might hold in connection with these transactions and the potential effects of any claims or other rights on a proposed compromise between the AMR debtors and financing parties Agencia Especial de Financiamento Industrial and Banco Nacional de Desenvolvimento Economico e Social.

Transaction background

According to the examiner appointment motion, American Eagle and American Airlines completed a series of intercompany transactions in the weeks leading up to the Chapter 11 filing that resulted in American Airlines assuming $2.26 billion in additional debt that American Eagle previously owed to the financing parties.

"On their face, the pre-petition transactions raise serious questions as to whether American Airlines received fair value in exchange for incurring the billions of dollars in debt and as to whether these transactions were otherwise improper," Marathon said in its motion.

Marathon said the AMR debtors have said that they have considered whether the transactions in question are potentially subject to avoidance as fraudulent transfers and have concluded that claims related to the transactions "are not supported by the facts or applicable law."

Independent review needed

Marathon said the AMR debtors "are simply not in a position to conduct an independent review of these issues" because they are still operated by the same management that apparently designed, approved and completed the transactions and because the issues surrounding the transactions are not issues that all of the debtors can properly consider on a collective basis.

"The prepetition transactions involve billions of dollars in value that shifted among the debtors, as a result of which American Eagle and AMR may have been winners at the expense of American Airlines being a loser," Marathon said.

In addition, Marathon said the pre-bankruptcy transactions have become an issue in the Chapter 11 cases now because the AMR debtors have sought approval of debt-restructuring transactions that would reduce or eliminate the ability of American Airlines to seek redress if any part of the transactions proved to be avoidable.

A hearing is scheduled for Nov. 8.

AMR Corp., the Fort Worth-based parent of American Airlines, filed for bankruptcy on Nov. 29, 2011. Its Chapter 11 case number is 11-15463.

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