WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court today declined to hear a case in which U.S. Bank Trust NA (U.S. Bank) argued that bankrupt AMR Corp., the parent company of American Airlines Inc., owed its bondholders a penalty fee related to the repayment of debt for which it had obtained post-petition financing of $1.5 billion (U.S. Bank Trust National Association v. AMR Corporation, No. 13-971, U.S. Sup.; See 9/18/13) [lexis.com subscribers may access Supreme Court briefs for this case].
In 2011, AMR filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. As its affiliate, American Airlines also entered Chapter 11 bankruptcy at that time.
The Bankruptcy Court authorized AMR and American Airlines to obtain $1.5 billion in post-petition secured financing and to repay existing prepetition debt owed to U.S. Bank, the trustee and security agent under the indenture and aircraft security agreement for American Airlines 2009-2 senior secured notes.
The Bankruptcy Court also denied U.S. Bank's request for relief from the automatic stay.
The bank appealed directly to the Second Circuit U.S. Court of Appeals, contending that American Airlines was “voluntarily attempting to repay the debt owed on its notes” and, therefore, that the airline had to pay a “make-whole amount under the terms of the indentures, and pursuant to its 11 U.S. Code Section 1110(a) elections.”
11 U.S. Code Section 1110
The Second Circuit, however, affirmed the Bankruptcy Court in a Sept. 12, 2013, decision. The panel authorized American to seek post-petition financing and to repay outstanding principal and interest without paying a “make-whole amount” to U.S. Bank. The Second Circuit also declined to lift the automatic stay.
U.S. Bank filed a petition for a writ of certiorari with the U.S. Supreme Court on Feb. 12.
The bank had argued that it was entitled to the “make-whole amount” because it had the right to “rescind” the accelerated payoff of those bonds.
The bank is represented by Franklin H. Top of Chapman & Cutler in Chicago. AMR is represented by Michael Edward Wiles of Debevoise & Plimpton in New York.
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