American Airlines tenders for 7% revenue bonds

New York, Aug. 18 - American Airlines Inc. (Caa2/CCC) said that it had begun a "modified Dutch auction" tender offer for a portion of its outstanding 7% Alliance Airport Authority Inc. special facilities revenue bonds, series 1991, American Airlines Inc., Project, due 2011.

It set an expiration date for the offer of Sept. 14 and said the offer would likely settle on Sept. 17, with both deadlines subject to possible extension.

American Airlines, a Fort Worth, Texas-based wholly owned airline subsidiary of AMR Corp., said that it would purchase between $71.8 million and $78.8 million principal amount of the bonds, out of the $125.745 million outstanding.

It will pay a purchase price of between 82% and 90% of the principal amount of the notes accepted for purchase plus accrued and unpaid interest up to but not including the settlement date. Holders can tender their bonds at any level between that minimum and the maximum in increments of 0.25%. The maximum total amount of consideration that American will pay for the principal of the bonds after tender expenses and unpaid accrued interest on the tendered bonds is about $64.6 million.

Under the "modified Dutch auction" process, American will accept tenders in the order of lowest to highest tender prices specified by tendering bondholders and will select the single lowest price per $5,000 principal amount of bonds that will enable it to buy the most bonds that it can while staying within its maximum total consideration amount limit.

In the event that the amount of the bonds validly tendered by the expiration date at or below the purchase price the company decides upon exceeds the maximum offer consideration, American will first accept for purchase all bonds validly tendered at tender prices below the purchase price. After that, bonds validly tendered at the purchase price will be accepted for purchase on a pro-rata basis. It will not accept for purchase any bonds tendered at a higher price.

American said it is making the offer for the purpose of spending excess bond proceeds and investment earnings held by the bond trustee and remaining after completion of construction of the airport facilities for which the bonds were issued.

The dealer managers for the offer are Merrill Lynch & Co. (call collect at 212 449-4914 or at 888 654-8637) and Blaylock & Partners LP (call 415 781-3400 or at 866 869-7160). Bondholder Communications Group is the information agent (call 888 385-2663 or contact the company via e-mail at aairhart@bondcom.com).

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