Lawyer's comments give AMR shares a bounce

David Koenig, AP Airlines Writer
Associated Press

DALLAS (AP) -- Shares of American Airlines parent AMR Corp. rallied Wednesday after a company lawyer said stockholders might get something back when the company emerges from bankruptcy protection.

AMR could exit from Chapter 11 soon after deciding whether to merge with US Airways or remain independent.

Executives of the companies were meeting this week with AMR bondholders, who are deciding which option would provide the best recovery for their investments, according to a person familiar with the situation.

The bondholders' group, which includes JPMorgan Chase, listened to a presentation by AMR executives Tuesday and will meet with US Airways officials Thursday, according to the person, who spoke on condition of anonymity about the private talks.

AMR and US Airways declined to comment.

Companies often issue new stock after exiting bankruptcy, rendering the old shares worthless. AMR shares topped $40 in early 2007 but had slid to $1.62 by the time the company filed for Chapter 11 protection in November 2011. They were pulled from the New York Stock Exchange but were still traded over the counter.

For most of 2012, they bumped along between 40 and 60 cents before beginning a steady rise in mid-November amid growing speculation that American might merge with US Airways. The shares gained 149 percent from Nov. 16 through Tuesday.

On Wednesday, the shares jumped 39 cents, or 43 percent, to $1.29. Volume was about 16 times the normal amount.

Since filing for bankruptcy, AMR has consistently warned that the shares could be worthless. On Tuesday, however, the company disclosed in a court filing that its chief bankruptcy attorney thinks they might have some value after all.

The lawyer, Harvey Miller, wrote in a letter to a Justice Department lawyer that AMR's value has "significantly appreciated" because of changes that AMR has made to fix its business in the past year.

"Depending upon the ultimate strategic alternative adopted and pursued, there exists a reasonable possibility that there may be value for AMR equity holders," Miller wrote in the letter, which was dated Jan. 3.

The comment about "ultimate strategic alternatives" referred to whether AMR decides to merge with US Airways Group Inc. or emerge from Chapter 11 on its own. Miller's letter didn't explicitly endorse a merger or stand-alone plan, but many analysts believe that a merger is inevitable and could be announced in the next few weeks.

Shares of US Airways fell 3 cents to close at $15.13. They have more than tripled since AMR filed for bankruptcy. In the same period, shares of United Continental Holdings Inc. gained a more modest 55 percent and Delta Air Lines Inc. shares climbed 76 percent.

Analysts say the rally in US Airways shares has been partly due to the company's recent financial performance and partly in anticipation of a merger with American, which would create an airline roughly the same size as United, the world's largest.