American falls on labor pains; National Steel up; Mirant higher after company obtains waiver

By Carlise Newman

Chicago, April 21 - American Airlines' bonds plummeted Monday after days of fluctuating as the company yet again contemplated bankruptcy. American's unions are demanding a revote after a Securities and Exchange Commission filing revealed top executives will be well compensated.

The bright spot of the day was National Steel Corp., cheered by United States Steel Corp.'s plan to buy the bankrupt company. The bid was accepted by National Steel and then obtained bankruptcy court approval in a hearing Monday.

Beleaguered American Airlines parent company AMR Corp.'s bonds tumbled Monday. Its 9% notes due 2012 fell four points from Thursday's levels, to 34 bid/36 offered as the company met with union leaders again to discuss the next step for the troubled air carrier.

American faces bankruptcy concerns again this week, just days after avoiding Chapter 11, as unions for its flight attendants, ground workers and mechanics threaten to pull back concessions.

The three major unions learned last week of special pension funds for senior management that would be paid even in bankruptcy and retention bonuses - which were later cancelled. The plans came to light in a filing to the Securities and Exchange Commission just as workers agreed on Wednesday to pay cuts of 15% to 23% and thousands of layoffs.

The Association of Professional Flight Attendants, which represents about a quarter of American's work force, is calling for a new vote on the concessions, saying its ratification last Wednesday had been tainted by revelations of the executive compensation packages.

The management perks include bonuses for six top executives if they stayed with the company and funding for a special pension trust that would be paid to the airline's top 45 executives, even if the carrier went bankrupt. American has said that these plans had been around for some time, were common among major companies and were needed to keep top executives on board.

AMR has said it would have quickly filed for Chapter 11 protection from creditors if unions didn't agree to the concessions. The roughly $4 billion per year in cuts are expected to cut total operating costs by about 21%, reducing AMR's unit costs to levels competitive with other large U.S. airlines.

"You have to wonder what else is that CEO hiding? He's not helping if he wants them to stay out of bankruptcy," said a trader.

American's employees will most likely get their answer to that this evening. Reuters reported American Airlines chief executive Don Carty was scheduled to hold a news conference at 6 p.m. ET Monday to address executive compensation issues, the airline said in a statement.

National Steel's 9 7/8% notes due 2009 were quoted at 67 bid/68 offered, a point higher than Thursday's trade, when it announced it had accepted a bid from U.S. Steel.

U.S. Steel's $850 million cash bid for substantially all of National Steel's assets was approved by the bankruptcy court on Monday. The deal also includes the assumption of $200 million in liabilities.

Last week, National Steel exercised its rights to terminate an asset purchase agreement with lead bidder AK Steel Holding Corp. because it was unable to strike a new labor contract with the United Steelworkers of America union.

Calpine Corp. was seen active throughout the day, a distressed debt trader said. The San Jose, Calif.-based independent power operator's 8½% notes due 2011 were seen at 64 bid/65 offered, unchanged from Thursday.

"The prices were pretty much unchanged but it was buzzing," said the trader.

"Otherwise it was quiet. Easter hangover. I'm not going to write off the whole week, but there were no standouts today."

Also moving within energy companies, bids on Mirant Corp's bank debt were said to be "creeping up" on Monday, according to a trader, with the bid being quoted in the 78, 79 range. Previously, indications on the bank paper were around 72, 73.

"With no offer out there the bid had been creeping up," the trader said. "I think there are like four or five funds looking at this right now."

Possibly also influencing the bid was the emergence of news on Monday that the company obtained a waiver from its lenders regarding potential events of default in order to allow the company to focus on refinancing its debt.

The Atlanta energy company is presently working on refinancing its debt with the most current debt due being the $1.125 billion credit facility maturing in mid-July.

(Sara Rosenberg contributed to this report.)

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