U.S. bankruptcy filings drop 14 pct in 2012

Fri Jan 4, 2013 4:39pm EST

Jan 4 (Reuters) - The number of U.S. bankruptcy filings fell 14 percent in 2012 to the lowest level since the financial crisis of 2008, according to a report by the American Bankruptcy Institute (ABI), which forecast a further drop this year.

There were 1.19 million bankruptcies in 2012, down from 1.38 million in 2011, based on information compiled by Epiq Systems Inc. Noncommercial filings dropped 14 percent to 1.13 million and commercial filings fell 22 percent to 57,788.

Filings will likely continue to decrease in 2013 as U.S. households continue to cut their debt and interest rates remain low, said Samuel Gerdano, executive director of the ABI.

Despite the spike in filings following the financial crisis, U.S. recession and housing crash, the average number of filings over the past four years -- 1.39 million annually -- was generally low by recent standards.

In 2005, the U.S. Congress adopted changes to bankruptcy laws that were meant to require greater proof to file for bankruptcy. In the 10 years leading up the reform, there was an average of 1.50 million filings annually, according to data from the ABI.

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American Airlines entering critical period in restructuring

Fri Jan 4, 2013 4:47pm EST

* Board meets beginning Wednesday

* To review tie-up with US Airways vs independence -sources

* No formal choice expected at next week's meeting -sources

By Soyoung Kim and Nick Brown and Karen Jacobs

Jan 4 (Reuters) - As American Airlines' board meets next week, expectations are high that it will give more concrete shape to the airline's plans to either merge with US Airways or stay independent.

The directors of parent AMR Corp plan to review a tie-up with its smaller rival against an alternative plan to exit bankruptcy as a standalone company, several people familiar with the matter said.

But the people close to the talks told Reuters they do not expect the AMR board to formally choose one option over the other next week, as detailed terms of a deal, such as price and the new management team, have yet to be hammered out. There are currently no plans for an announcement after the meeting.

The meeting that starts Wednesday could still provide clues about whether American is finding merit in the idea of merging with US Airways while it is still restructuring in bankruptcy.

AMR Chief Executive Tom Horton rebuffed an aggressive takeover push from US Airways early in the bankruptcy process, saying American preferred to exit court protection on its own and consider a deal later.

Now, after several months of talks with US Airways and AMR's creditors, Horton has softened his approach at the insistence of the creditors' committee and agreed to consider all options.

In a message to employees on Thursday, Horton said there's no specific deadline for the evaluation to end, but the company expects to "bring this to a conclusion within a matter of weeks."

"I can assure you we are conducting a collaborative, fact-based analysis to determine the best path forward for American," he said.

US Airways, which has pursued the merger for more than a year, is hoping that AMR's board recognizes the benefits of a combination and will choose to move quickly to negotiate final terms of a deal as soon as this month, the people said.

US Airways declined to comment for this story.

A deal in bankruptcy remains uncertain and could still founder on price or other issues. The pilots union for US Airways must vote on how the integration of labor contracts would work, a process that would take several weeks. Other unions also are reviewing the details.

The equity split also remains at issue. US Airways' formal merger proposal in November suggested that AMR's creditors would own 70 percent of the merged entity, and the US Airways shareholders the remainder. AMR has said its creditors deserve closer to 80 percent.

Still, Horton's new tone and other recent events suggest the combination long championed by US Airways and by pilot unions at both airlines will get a serious review by AMR's board.

With one major obstacle - labor integration - appearing closer to resolution, AMR board members will be faced with a merger scenario that is becoming more specific.

The board of the Airline Pilots Association, the union representing AMR pilots, last week approved a memorandum of understanding laying the groundwork for how it would integrate its workforce with that of US Airways. If US Airways pilots also agree, that would mark a major step toward ensuring relative labor peace between the unions, something many tie-ups in the airline sector have historically lacked.

AMR leaders had previously warned that labor integration challenges could render any benefits of a merger smaller than what US Airways has said.

American is the last of the three major U.S. airlines to restructure through bankruptcy. AMR declared bankruptcy in November 2011 citing high labor costs, and eventually reached new, cost-saving contracts with its three primary unions, including its pilots, after bitter negotiations.

A BIGGER AMERICAN?

A lot is riding on AMR's choice. A tie-up with US Airways would give American Airlines the scale to match bigger rivals that are upgrading service and expanding international routes. Yet going it alone could spare the company the operational headaches associated with mergers, preserve existing management and give it more control over its destiny.

A combined American-US Airways would have revenue of $37.03 billion based on 2011 figures, on par with the $37.11 billion delivered by United Continental Holdings, which became the world's biggest carrier when it was formed in 2010. The new American would have 118,000 employees, compared with some 88,000 at United.

The new carrier would have a solid presence on the important U.S. East and West coasts and on North Atlantic routes, given American's revenue-sharing joint venture with British Airways and Iberia. American currently has East Coast hubs in Miami and New York, while US Airways has key operations in Philadelphia and Charlotte, North Carolina.

The East Coast operations could be structured in a way to make a combined American-US Airways more competitive against Delta Air Lines, which operates out of Atlanta and New York, and United Continental, which has a major hub in Newark, New Jersey. Delta and United are both the products of mergers.

A merged American "could potentially become the dominant player on the East Coast," said John Wensveen, head of airline advisory services at Radixx International, which provides distribution systems and management consulting.

He said American already faces the prospect of greater competition for corporate clients on the lucrative New York-to-London Heathrow route now that Delta is buying a stake in Virgin Atlantic and plans to apply for a joint venture that would allow revenue-sharing.

Still, analysts say a combined carrier would have challenges such as integrating its workforce.

George Hamlin, an aviation consultant in Fairfax, Virginia, said US Airways staff working under bankruptcy-era contracts could expect to be brought up to the same pay level as American Airlines employees, likely raising costs of the combined entity.

"You need to sit down and carefully look at how all the pieces go together," Hamlin said. "This would have an impact on the cost structure of American."

American Airlines doesn't have to take the merger path. Reported results since the carrier filed for Chapter 11 bankruptcy protection last year suggest the leaner company would be profitable when it emerges.

In the third quarter, American produced a profit of 33 cents a share, excluding one-time items. Earnings before interest, tax, depreciation, amortization and restructuring costs (EBITDAR) came to $1.61 billion.

With cost and revenue benefits from the bankruptcy filing included, AMR projects that EBITDAR figure could nearly double to $2.95 billion by the third quarter of 2013, according to data from the carrier.

But Helane Becker, an airline analyst with Dahlman Rose, said an independent American and US Airways would both face challenges of how to grow to compete effectively longer term.

"United and Delta would start to leapfrog them," Becker said. "From American's point of view as they are emerging from Chapter 11, they have to ask the question how do they go from $25 billion in revenue to $35 billion in revenue to compete with United and Delta."

The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

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UPDATE 1-American Airlines entering key period in restructuring

Fri Jan 4, 2013 7:04pm EST

* Board meets beginning Wednesday

* To review tie-up with US Airways vs independence -sources

* No formal choice expected at next week's meeting -sources

By Soyoung Kim and Nick Brown and Karen Jacobs

Jan 4 (Reuters) - As American Airlines' board meets next week, expectations are high that it will give more concrete shape to the airline's plans to either merge with US Airways or stay independent.

The directors of parent AMR Corp plan to review a tie-up with its smaller rival against an alternative plan to exit bankruptcy as a standalone company, several people familiar with the matter said.

But the people close to the talks told Reuters they do not expect the AMR board to formally choose one option over the other next week, as detailed terms of a deal, such as price and the new management team, have yet to be hammered out. There are currently no plans for an announcement after the meeting.

The meeting that starts Wednesday could still provide clues about whether American is finding merit in the idea of merging with US Airways while it is still restructuring in bankruptcy.

AMR Chief Executive Tom Horton rebuffed an aggressive takeover push from US Airways early in the bankruptcy process, saying American preferred to exit court protection on its own and consider a deal later.

Now, after several months of talks with US Airways and AMR's creditors, Horton has softened his approach at the insistence of the creditors' committee and agreed to consider all options.

In a message to employees on Thursday, Horton said there's no specific deadline for the evaluation to end, but the company expects to "bring this to a conclusion within a matter of weeks."

"I can assure you we are conducting a collaborative, fact-based analysis to determine the best path forward for American," he said.

US Airways, which has pursued the merger for more than a year, is hoping that AMR's board recognizes the benefits of a combination and will choose to move quickly to negotiate final terms of a deal as soon as this month, the people said.

US Airways declined to comment for this story.

A deal in bankruptcy remains uncertain and could still founder on price or other issues. The pilots union for US Airways must still vote on how to integrate labor contracts, but the process got a boost late on Friday with a recommendation by the board of the US Airline Pilots Association. Other unions also are reviewing the details.

The equity split also remains at issue. US Airways' formal merger proposal in November suggested that AMR's creditors would own 70 percent of the merged entity, and the US Airways shareholders the remainder. AMR has said its creditors deserve closer to 80 percent.

Still, Horton's new tone and other recent events suggest the combination long championed by US Airways and by pilot unions at both airlines will get a serious review by AMR's board.

With one major obstacle - labor integration - appearing closer to resolution, AMR board members will be faced with a merger scenario that is becoming more specific.

The board of the Airline Pilots Association, the union representing AMR pilots, last week approved a memorandum of understanding laying the groundwork for how it would integrate its workforce with that of US Airways.

The board of the US Airline Pilots Association voted on Friday to recommend its member ratify that MOU. The move sent a "pretty strong message" of support, a pilot at US Airways said.

Voting is likely to take several weeks. If the union's 5,000 members ratify it, the deal would mark a major step toward ensuring relative labor peace between the unions, something many tie-ups in the airline sector have historically lacked.

AMR leaders had previously warned that labor integration challenges could render any benefits of a merger smaller than what US Airways has said.

American is the last of the three major U.S. airlines to restructure through bankruptcy. AMR declared bankruptcy in November 2011 citing high labor costs, and eventually reached new, cost-saving contracts with its three primary unions, including its pilots, after bitter negotiations.

A BIGGER AMERICAN?

A lot is riding on AMR's choice. A tie-up with US Airways would give American Airlines the scale to match bigger rivals that are upgrading service and expanding international routes. Yet going it alone could spare the company the operational headaches associated with mergers, preserve existing management and give it more control over its destiny.

A combined American-US Airways would have revenue of $37.03 billion based on 2011 figures, on par with the $37.11 billion delivered by United Continental Holdings, which became the world's biggest carrier when it was formed in 2010. The new American would have 118,000 employees, compared with some 88,000 at United.

The new carrier would have a solid presence on the important U.S. East and West coasts and on North Atlantic routes, given American's revenue-sharing joint venture with British Airways and Iberia. American currently has East Coast hubs in Miami and New York, while US Airways has key operations in Philadelphia and Charlotte, North Carolina.

The East Coast operations could be structured in a way to make a combined American-US Airways more competitive against Delta Air Lines, which operates out of Atlanta and New York, and United Continental, which has a major hub in Newark, New Jersey. Delta and United are both the products of mergers.

A merged American "could potentially become the dominant player on the East Coast," said John Wensveen, head of airline advisory services at Radixx International, which provides distribution systems and management consulting.

He said American already faces the prospect of greater competition for corporate clients on the lucrative New York-to-London Heathrow route now that Delta is buying a stake in Virgin Atlantic and plans to apply for a joint venture that would allow revenue-sharing.

Still, analysts say a combined carrier would have challenges such as integrating its workforce.

George Hamlin, an aviation consultant in Fairfax, Virginia, said US Airways staff working under bankruptcy-era contracts could expect to be brought up to the same pay level as American Airlines employees, likely raising costs of the combined entity.

"You need to sit down and carefully look at how all the pieces go together," Hamlin said. "This would have an impact on the cost structure of American."

American Airlines doesn't have to take the merger path. Reported results since the carrier filed for Chapter 11 bankruptcy protection last year suggest the leaner company would be profitable when it emerges.

In the third quarter, American produced a profit of 33 cents a share, excluding one-time items. Earnings before interest, tax, depreciation, amortization and restructuring costs (EBITDAR) came to $1.61 billion.

With cost and revenue benefits from the bankruptcy filing included, AMR projects that EBITDAR figure could nearly double to $2.95 billion by the third quarter of 2013, according to data from the carrier.

But Helane Becker, an airline analyst with Dahlman Rose, said an independent American and US Airways would both face challenges of how to grow to compete effectively longer term.

"United and Delta would start to leapfrog them," Becker said. "From American's point of view as they are emerging from Chapter 11, they have to ask the question how do they go from $25 billion in revenue to $35 billion in revenue to compete with United and Delta."

The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

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U.S. bankruptcy filings drop 14 pct in 2012

Fri Jan 4, 2013 4:39pm EST

Jan 4 (Reuters) - The number of U.S. bankruptcy filings fell 14 percent in 2012 to the lowest level since the financial crisis of 2008, according to a report by the American Bankruptcy Institute (ABI), which forecast a further drop this year.

There were 1.19 million bankruptcies in 2012, down from 1.38 million in 2011, based on information compiled by Epiq Systems Inc. Noncommercial filings dropped 14 percent to 1.13 million and commercial filings fell 22 percent to 57,788.

Filings will likely continue to decrease in 2013 as U.S. households continue to cut their debt and interest rates remain low, said Samuel Gerdano, executive director of the ABI.

Despite the spike in filings following the financial crisis, U.S. recession and housing crash, the average number of filings over the past four years -- 1.39 million annually -- was generally low by recent standards.

In 2005, the U.S. Congress adopted changes to bankruptcy laws that were meant to require greater proof to file for bankruptcy. In the 10 years leading up the reform, there was an average of 1.50 million filings annually, according to data from the ABI.

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American Airlines entering critical period in restructuring

Fri Jan 4, 2013 4:47pm EST

* Board meets beginning Wednesday

* To review tie-up with US Airways vs independence -sources

* No formal choice expected at next week's meeting -sources

By Soyoung Kim and Nick Brown and Karen Jacobs

Jan 4 (Reuters) - As American Airlines' board meets next week, expectations are high that it will give more concrete shape to the airline's plans to either merge with US Airways or stay independent.

The directors of parent AMR Corp plan to review a tie-up with its smaller rival against an alternative plan to exit bankruptcy as a standalone company, several people familiar with the matter said.

But the people close to the talks told Reuters they do not expect the AMR board to formally choose one option over the other next week, as detailed terms of a deal, such as price and the new management team, have yet to be hammered out. There are currently no plans for an announcement after the meeting.

The meeting that starts Wednesday could still provide clues about whether American is finding merit in the idea of merging with US Airways while it is still restructuring in bankruptcy.

AMR Chief Executive Tom Horton rebuffed an aggressive takeover push from US Airways early in the bankruptcy process, saying American preferred to exit court protection on its own and consider a deal later.

Now, after several months of talks with US Airways and AMR's creditors, Horton has softened his approach at the insistence of the creditors' committee and agreed to consider all options.

In a message to employees on Thursday, Horton said there's no specific deadline for the evaluation to end, but the company expects to "bring this to a conclusion within a matter of weeks."

"I can assure you we are conducting a collaborative, fact-based analysis to determine the best path forward for American," he said.

US Airways, which has pursued the merger for more than a year, is hoping that AMR's board recognizes the benefits of a combination and will choose to move quickly to negotiate final terms of a deal as soon as this month, the people said.

US Airways declined to comment for this story.

A deal in bankruptcy remains uncertain and could still founder on price or other issues. The pilots union for US Airways must vote on how the integration of labor contracts would work, a process that would take several weeks. Other unions also are reviewing the details.

The equity split also remains at issue. US Airways' formal merger proposal in November suggested that AMR's creditors would own 70 percent of the merged entity, and the US Airways shareholders the remainder. AMR has said its creditors deserve closer to 80 percent.

Still, Horton's new tone and other recent events suggest the combination long championed by US Airways and by pilot unions at both airlines will get a serious review by AMR's board.

With one major obstacle - labor integration - appearing closer to resolution, AMR board members will be faced with a merger scenario that is becoming more specific.

The board of the Airline Pilots Association, the union representing AMR pilots, last week approved a memorandum of understanding laying the groundwork for how it would integrate its workforce with that of US Airways. If US Airways pilots also agree, that would mark a major step toward ensuring relative labor peace between the unions, something many tie-ups in the airline sector have historically lacked.

AMR leaders had previously warned that labor integration challenges could render any benefits of a merger smaller than what US Airways has said.

American is the last of the three major U.S. airlines to restructure through bankruptcy. AMR declared bankruptcy in November 2011 citing high labor costs, and eventually reached new, cost-saving contracts with its three primary unions, including its pilots, after bitter negotiations.

A BIGGER AMERICAN?

A lot is riding on AMR's choice. A tie-up with US Airways would give American Airlines the scale to match bigger rivals that are upgrading service and expanding international routes. Yet going it alone could spare the company the operational headaches associated with mergers, preserve existing management and give it more control over its destiny.

A combined American-US Airways would have revenue of $37.03 billion based on 2011 figures, on par with the $37.11 billion delivered by United Continental Holdings, which became the world's biggest carrier when it was formed in 2010. The new American would have 118,000 employees, compared with some 88,000 at United.

The new carrier would have a solid presence on the important U.S. East and West coasts and on North Atlantic routes, given American's revenue-sharing joint venture with British Airways and Iberia. American currently has East Coast hubs in Miami and New York, while US Airways has key operations in Philadelphia and Charlotte, North Carolina.

The East Coast operations could be structured in a way to make a combined American-US Airways more competitive against Delta Air Lines, which operates out of Atlanta and New York, and United Continental, which has a major hub in Newark, New Jersey. Delta and United are both the products of mergers.

A merged American "could potentially become the dominant player on the East Coast," said John Wensveen, head of airline advisory services at Radixx International, which provides distribution systems and management consulting.

He said American already faces the prospect of greater competition for corporate clients on the lucrative New York-to-London Heathrow route now that Delta is buying a stake in Virgin Atlantic and plans to apply for a joint venture that would allow revenue-sharing.

Still, analysts say a combined carrier would have challenges such as integrating its workforce.

George Hamlin, an aviation consultant in Fairfax, Virginia, said US Airways staff working under bankruptcy-era contracts could expect to be brought up to the same pay level as American Airlines employees, likely raising costs of the combined entity.

"You need to sit down and carefully look at how all the pieces go together," Hamlin said. "This would have an impact on the cost structure of American."

American Airlines doesn't have to take the merger path. Reported results since the carrier filed for Chapter 11 bankruptcy protection last year suggest the leaner company would be profitable when it emerges.

In the third quarter, American produced a profit of 33 cents a share, excluding one-time items. Earnings before interest, tax, depreciation, amortization and restructuring costs (EBITDAR) came to $1.61 billion.

With cost and revenue benefits from the bankruptcy filing included, AMR projects that EBITDAR figure could nearly double to $2.95 billion by the third quarter of 2013, according to data from the carrier.

But Helane Becker, an airline analyst with Dahlman Rose, said an independent American and US Airways would both face challenges of how to grow to compete effectively longer term.

"United and Delta would start to leapfrog them," Becker said. "From American's point of view as they are emerging from Chapter 11, they have to ask the question how do they go from $25 billion in revenue to $35 billion in revenue to compete with United and Delta."

The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

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UPDATE 1-American Airlines entering key period in restructuring

Fri Jan 4, 2013 7:04pm EST

* Board meets beginning Wednesday

* To review tie-up with US Airways vs independence -sources

* No formal choice expected at next week's meeting -sources

By Soyoung Kim and Nick Brown and Karen Jacobs

Jan 4 (Reuters) - As American Airlines' board meets next week, expectations are high that it will give more concrete shape to the airline's plans to either merge with US Airways or stay independent.

The directors of parent AMR Corp plan to review a tie-up with its smaller rival against an alternative plan to exit bankruptcy as a standalone company, several people familiar with the matter said.

But the people close to the talks told Reuters they do not expect the AMR board to formally choose one option over the other next week, as detailed terms of a deal, such as price and the new management team, have yet to be hammered out. There are currently no plans for an announcement after the meeting.

The meeting that starts Wednesday could still provide clues about whether American is finding merit in the idea of merging with US Airways while it is still restructuring in bankruptcy.

AMR Chief Executive Tom Horton rebuffed an aggressive takeover push from US Airways early in the bankruptcy process, saying American preferred to exit court protection on its own and consider a deal later.

Now, after several months of talks with US Airways and AMR's creditors, Horton has softened his approach at the insistence of the creditors' committee and agreed to consider all options.

In a message to employees on Thursday, Horton said there's no specific deadline for the evaluation to end, but the company expects to "bring this to a conclusion within a matter of weeks."

"I can assure you we are conducting a collaborative, fact-based analysis to determine the best path forward for American," he said.

US Airways, which has pursued the merger for more than a year, is hoping that AMR's board recognizes the benefits of a combination and will choose to move quickly to negotiate final terms of a deal as soon as this month, the people said.

US Airways declined to comment for this story.

A deal in bankruptcy remains uncertain and could still founder on price or other issues. The pilots union for US Airways must still vote on how to integrate labor contracts, but the process got a boost late on Friday with a recommendation by the board of the US Airline Pilots Association. Other unions also are reviewing the details.

The equity split also remains at issue. US Airways' formal merger proposal in November suggested that AMR's creditors would own 70 percent of the merged entity, and the US Airways shareholders the remainder. AMR has said its creditors deserve closer to 80 percent.

Still, Horton's new tone and other recent events suggest the combination long championed by US Airways and by pilot unions at both airlines will get a serious review by AMR's board.

With one major obstacle - labor integration - appearing closer to resolution, AMR board members will be faced with a merger scenario that is becoming more specific.

The board of the Airline Pilots Association, the union representing AMR pilots, last week approved a memorandum of understanding laying the groundwork for how it would integrate its workforce with that of US Airways.

The board of the US Airline Pilots Association voted on Friday to recommend its member ratify that MOU. The move sent a "pretty strong message" of support, a pilot at US Airways said.

Voting is likely to take several weeks. If the union's 5,000 members ratify it, the deal would mark a major step toward ensuring relative labor peace between the unions, something many tie-ups in the airline sector have historically lacked.

AMR leaders had previously warned that labor integration challenges could render any benefits of a merger smaller than what US Airways has said.

American is the last of the three major U.S. airlines to restructure through bankruptcy. AMR declared bankruptcy in November 2011 citing high labor costs, and eventually reached new, cost-saving contracts with its three primary unions, including its pilots, after bitter negotiations.

A BIGGER AMERICAN?

A lot is riding on AMR's choice. A tie-up with US Airways would give American Airlines the scale to match bigger rivals that are upgrading service and expanding international routes. Yet going it alone could spare the company the operational headaches associated with mergers, preserve existing management and give it more control over its destiny.

A combined American-US Airways would have revenue of $37.03 billion based on 2011 figures, on par with the $37.11 billion delivered by United Continental Holdings, which became the world's biggest carrier when it was formed in 2010. The new American would have 118,000 employees, compared with some 88,000 at United.

The new carrier would have a solid presence on the important U.S. East and West coasts and on North Atlantic routes, given American's revenue-sharing joint venture with British Airways and Iberia. American currently has East Coast hubs in Miami and New York, while US Airways has key operations in Philadelphia and Charlotte, North Carolina.

The East Coast operations could be structured in a way to make a combined American-US Airways more competitive against Delta Air Lines, which operates out of Atlanta and New York, and United Continental, which has a major hub in Newark, New Jersey. Delta and United are both the products of mergers.

A merged American "could potentially become the dominant player on the East Coast," said John Wensveen, head of airline advisory services at Radixx International, which provides distribution systems and management consulting.

He said American already faces the prospect of greater competition for corporate clients on the lucrative New York-to-London Heathrow route now that Delta is buying a stake in Virgin Atlantic and plans to apply for a joint venture that would allow revenue-sharing.

Still, analysts say a combined carrier would have challenges such as integrating its workforce.

George Hamlin, an aviation consultant in Fairfax, Virginia, said US Airways staff working under bankruptcy-era contracts could expect to be brought up to the same pay level as American Airlines employees, likely raising costs of the combined entity.

"You need to sit down and carefully look at how all the pieces go together," Hamlin said. "This would have an impact on the cost structure of American."

American Airlines doesn't have to take the merger path. Reported results since the carrier filed for Chapter 11 bankruptcy protection last year suggest the leaner company would be profitable when it emerges.

In the third quarter, American produced a profit of 33 cents a share, excluding one-time items. Earnings before interest, tax, depreciation, amortization and restructuring costs (EBITDAR) came to $1.61 billion.

With cost and revenue benefits from the bankruptcy filing included, AMR projects that EBITDAR figure could nearly double to $2.95 billion by the third quarter of 2013, according to data from the carrier.

But Helane Becker, an airline analyst with Dahlman Rose, said an independent American and US Airways would both face challenges of how to grow to compete effectively longer term.

"United and Delta would start to leapfrog them," Becker said. "From American's point of view as they are emerging from Chapter 11, they have to ask the question how do they go from $25 billion in revenue to $35 billion in revenue to compete with United and Delta."

The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

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Maker of high-mileage 3-wheel vehicles buys former GM plant

By Ben Klayman

DETROIT | Thu Jan 3, 2013 2:37pm EST

DETROIT Jan 3 (Reuters) - Elio Motors has agreed to purchase a former General Motors Co assembly plant near Shreveport, Louisiana and will use it to build three-wheeled vehicles that it says will get more than 80 miles on a gallon of gasoline, the company said on Thursday.

Terms of the sale were not disclosed in a joint press release from Elio and Racer Trust, which owns properties GM disposed of in its bankruptcy. The deal is expected to close in the spring.

Elio said it expects to begin commercial vehicle production in mid-2014 with "significant hiring" at the plant to begin by the second quarter of that year and full employment of 1,500 people reached in late 2015. Louisiana state officials said in a separate release that Elio will begin renovating the plant early this year.

Elio said its car will achieve a highway mileage rating of more 80 miles per gallon. Louisiana officials said Elio is targeting a retail price of $6,800 for the car, which will be equipped with three airbags, power windows and air conditioning.

The Elio jobs will pay an average annual salary of $47,700, plus benefits, and the company will make a capital investment of $100 million, Louisiana officials said.

The Shreveport plant will be the 25th former GM property sold since the Racer Trust was established in March 2011, raising more than $27 million. The trust was charged with selling the 89 locations in 14 states that GM left behind following its 2009 bankruptcy and $50 billion taxpayer bailout.

Production at the former GM plant ceased in August 2012. GM had continued work at the plant under a lease with Racer Trust, officially known as the Revitalizing Auto Communities Environmental Response Trust.

Elio, founded in 2008, will build its three-wheeled vehicles in the 1.8 million-square-foot factory that was built in 1981 and most recently expanded in 2002. The property also includes a paint shop, powerhouse and wastewater treatment facility, rail spur and 530 acres of land.

Elio said it expects to use about 1 million of the more than 3 million square feet available for its manufacturing operations.

Industrial developer Stuart Lichter, who has acquired other former GM sites, will buy the 530-acre Shreveport site in conjunction with Elio and lease portions to other tenants, state officials said. Lichter is president of Los Angeles-based Industrial Realty Group.

Elio will receive an incentive package from Louisiana Economic Development, Louisiana officials said. The Caddo Parish Commission also is negotiating potential incentives.

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GM could face $918 mln hit from bankruptcy-related lawsuit

By Tom Hals

Thu Jan 3, 2013 4:03pm EST

Jan 3 (Reuters) - A U.S. bankruptcy judge could soon rule on whether the 2009 government-led restructuring of General Motors Co improperly favored hedge funds, and an adverse ruling could cost the automaker nearly $1 billion.

Judge Robert Gerber must decide whether a "lock-up agreement" in the restructuring sent $367 million to a group of hedge fund noteholders at the expense of other creditors.

A trust representing unsecured creditors has sued to undo the lock-up agreement, arguing that it was a last-minute deal secretly folded into GM's bankruptcy to ensure the hedge funds' support.

After the automaker, or "Old GM," filed for bankruptcy in 2009, its best assets were sold to the new General Motors Co . The remainder of the company was liquidated for the benefit of creditors.

While the hedge funds, which hold notes with about $1 billion in face value, received the $367 million under the lock-up agreement, unsecured creditors received just pennies on the dollar. The hedge funds and other investors in the notes also received a claim against "Old GM" for $2.67 billion.

In its lawsuit, which was filed in U.S. Bankruptcy Court in Manhattan, the creditors' trust alleged that the lock-up agreement was unfair to "Old GM" creditors. The trust said the deal took place after the bankruptcy filing and therefore required Gerber's approval, and it called on Gerber to unwind the deal.

GM and the hedge funds have argued the lock-up agreement was sealed before the bankruptcy and was not subject to Gerber's approval. They have also argued the agreement was not secret because it was disclosed in securities filings.

They also argued that the lock-up agreement cannot be unwound without undoing the entire restructuring.

At a court hearing in July, Gerber said he was "shocked" to learn about the hedge fund deal. "The bottom line is, is that this matter is huge," Gerber said. "There was a lack of disclosure to the court on the matter with the potential to injure 'Old GM' creditors to the extent of hundreds of millions, if not billions of dollars."

Gerber held several days of trial between August and October. The hedge funds and GM have asked Gerber to extend the trial for one more day to call a rebuttal witness, a request to which the judge has not responded publicly.

Although the judge has not said when he will rule on the lock-up agreement, experts say a ruling could come as early as this month.

A GM spokesman and Bruce Zirinsky, a Greenberg Traurig lawyer who represents the main hedge fund defendants, both said they expect to prevail but declined to comment further. A lawyer for the creditor trust, Eric Fisher of Dickstein Shapiro, did not respond to requests for comment.

The defendants are the hedge funds that signed the lock-up agreement, as well as others that invested in the notes along with the hedge funds. While GM is not a defendant, the automaker said in an earnings statement in August that the lawsuit could lead to a possible loss of as much as $918 million.

This is because GM could find itself on the hook for a loan of around $1 billion that was owed by GM Canada to a financing unit based in Nova Scotia that had issued notes to the hedge funds.

According to court papers, the lock-up agreement was negotiated with the involvement of Canada and the United States, which were funding the bankruptcy.

The two governments wanted to keep GM Canada out of that country's potentially complicated insolvency proceedings and agreed to pay the $367 million to the hedge funds to resolve GM Canada's debt to the Nova Scotia entity.

In addition to the payment, "Old GM" agreed not to contest claims against it by the noteholders with a face value of $2.67 billion.

Regardless of the outcome, Gerber said in July he expected his ruling to be appealed.

The case is Motors Liquidation Company GUC Trust v The Liverpool Limited Partnership et al, U.S. Bankruptcy Court, Southern District of New York, No. 12-09802.

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Calpers main fund posted 0.1 pct gain in fiscal 2011-12

SAN FRANCISCO | Thu Jan 3, 2013 9:02pm EST

SAN FRANCISCO Jan 3 (Reuters) - The California Public Employees' Retirement System said on Thursday rates for its member agencies will increase after it posted a net investment return of 0.1 percent in its core fund for its fiscal year ended June 30, 2012, compared with a net return of 21.7 percent in the prior fiscal year.

Agencies using the retirement system to manage pension accounts have been expecting rate increases after it released a preliminary report in July on its disappointing 2011-2012 fiscal year performance.

That report said the system, best known as Calpers, posted a 1 percent gain for the year due to Europe's debt crisis and slowing global growth.

Calpers' board last March also put the system's member agencies on notice of rate increases by voting to lower its longstanding 7.75 percent assumed rate of return to 7.5 percent.

Calpers, the biggest U.S. public pension system, said on Thursday in its Comprehensive Annual Financial Report that net assets in its main fund, the Public Employees' Retirement Fund, totaled $237.0 billion at the end of its 2011-2012 fiscal year.

The value of Calpers' assets was $251.8 billion as of Wednesday, according to a spokesman for the retirement system.

Most contribution rates for state agency and school employers in the 2013-2014 fiscal year and for local government employers in the 2014-2015 fiscal year are not expected to increase by more than 2 percent of payroll, Calpers said in Thursday's report.

If Calpers earns its assumed 7.5 percent investment return in its 2012-2013 fiscal year, employer rates for state and school employers in its 2014-2015 fiscal year and for local agencies in its 2015-2016 fiscal year are expected to increase in most cases between 0.2 percent and 0.7 percent of payroll, the report said.

The rates could increase more if Calpers earns less than 7.5 percent, the report said.

Local governments using the Calpers system keep a close eye on the rates as pension costs have become a top financial concern in a time of tight public budgets across the most populous U.S. state.

San Bernardino, a city of 210,000 east of Los Angeles, has opted to withhold payments to Calpers while seeking bankruptcy court protection from its creditors.

A U.S. bankruptcy judge last month ruled against an attempt by Calpers to collect overdue payments from San Bernardino, the first city to halt payments to the fund and challenge its primacy as a creditor.

Stockton, California, also declared bankruptcy last year but has made payments in full to Calpers. Vallejo, California, also made its payments to Calpers during the course of its bankruptcy proceedings. Vallejo emerged from bankruptcy in 2011.

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Chief justice stresses need for judges, funds despite US fiscal strain

Mon Dec 31, 2012 5:59pm EST

* Roberts cites "fiscal cliff," says US budget "gone awry"

* Says federal courts are trying to cut costs

By Jonathan Stempel

Dec 31 (Reuters) - U.S. Chief Justice John Roberts on Monday called on the White House and Congress to provide sufficient funding and enough judges to ensure that the federal judiciary can do its job well despite the fiscal problems the country faces.

In his annual report on the federal judiciary, Roberts recognized the battle in Washington over the "fiscal cliff," saying the country has a fiscal ledger that has "gone awry" and must address the longer-term problem of a "truly extravagant and burgeoning national debt."

He said the judiciary has been doing its part to cut costs aggressively, but can only go so far given that it cannot choose its caseload or economize much further without reducing the quality of its services.

Roberts noted the efforts of some courts to stay open after Hurricane Sandy, with the Manhattan federal court working without heat and under sparse light from emergency generators a day after the storm struck in late October.

"A significant and prolonged shortfall in judicial funding would inevitably result in the delay or denial of justice for the people the courts serve," he wrote. "I therefore encourage the President and Congress to be especially attentive to the needs of the Judicial Branch and provide the resources necessary for its operations."

FILLING VACANCIES

One need is judicial vacancies, which can be harder to fill amid partisan divides in Washington.

Democratic President Barack Obama has won confirmation of 172 nominees to the federal bench, compared with 205 that his Republican predecessor, George W. Bush, got over the same period in his first term, according to the Senate Judiciary Committee.

There are now 75 federal court vacancies, up from 55 when Obama took office in 2009, according to the Administrative Office of the U.S. Courts.

Twenty-seven of these vacancies have been deemed "judicial emergencies" by the Judicial Conference of the United States, based on case backlogs and duration.

That includes one judgeship that has been unfilled for eight years, and Roberts' own former seat on the federal appeals court in Washington, D.C., which has been vacant since he was elevated to the Supreme Court in 2005.

Roberts urged the White House and Congress to act diligently in confirming high-quality candidates to fill these vacancies.

Obama has nominated Caitlin Halligan, general counsel to Manhattan District Attorney Cyrus Vance, for Roberts' old seat.

FRACTION OF A CENT

Roberts said the Judicial Conference, then led by Chief Justice William Rehnquist, had adopted an aggressive cost-cutting strategy in 2004.

He said such efforts remain necessary given that federal judiciary, one of three U.S. government branches, received an appropriation of $6.97 billion for 2012 - a "miniscule" 0.2 cents of each dollar in the nation's $3.7 trillion budget.

The chief justice also said frugality begins at home, noting that the Supreme Court will seek $74.89 million of funding for its 2014 fiscal year, down 1 percent to 4 percent from each of the three prior years.

Cutbacks are needed even though most federal court caseloads have not changed appreciably, based on data provided by Roberts.

While case filings in district courts fell 5 percent this year to 372,563, filings in regional appeals courts rose 4 percent to 57,501. Supreme Court filings fell 2 percent to 7,713, and bankruptcy filings fell 14 percent to 1,261,140.

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