Fitch rates AMR converts CCC+

Fitch Ratings said it has assigned a CCC+ rating to the $300 million in senior unsecured convertible notes issued by AMR Corp., the parent of American Airlines Inc. The notes, which are guaranteed by American, carry a coupon rate of 4.5% and mature in 2024.

The outlook is stable.

Fitch said the convertible note rating reflects continuing concerns over very high debt levels relative to cash flow, the heavy fixed cash obligations faced by the company over the next three years, and a liquidity position that remains somewhat weak by industry standards.

While the financial turnaround rolled out by American in the spring of 2003 is clearly paying off in terms of improved operating performance, the carrier remains exposed to a litany of risks that could put pressure on liquidity and slow the process of balance sheet repair in 2004.

In particular, substantial debt and capital lease maturities (more than $800 million this year and at least $1.5 billion in 2005) and required funding of defined benefit pension plans (about $600 million this year) will offset much of the improvement in cash flow from operations that AMR is positioned to report this year.

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