The Court entered an order authorizing the retention of The Garden City Group as claims and noticing agent, retroactive to the petition date. The Garden City Group will have full responsibility for the distribution of notices and the maintenance, processing and docketing of proofs of claim filed in the bankruptcy cases. This is an administrative function.
Stipulation between American Airlines and Citibank to Assume Amended ISDA Master Agreement
American Airlines, Inc. (“American”) and Citibank, N.A. (“Citibank”) have entered into a stipulation to assume an amended derivatives agreement. Citibank and American are parties to an ISDA Master Agreement dated as of July 8, 1993 (the “Agreement”), pursuant to which American hedges certain of its jet fuel costs. The Court already authorized American to perform under these types of agreements, but the parties agree that the bankruptcy filing constitutes an event of default under the Agreement and, therefore, Citibank has a right to terminate the Agreement. The purpose of the proposed stipulation is to enable American to continue hedging its jet fuel costs through Citibank uninterrupted. In order to do so, the parties have agreed to amend the Agreement by requiring, among other things:
(i) certain increases in the requirement to provide credit support;
(ii) the elimination of the bankruptcy filing as an event of default;
(iii) the addition of certain events of default relating to conversion of the chapter 11 case to a chapter 7 case or dismissal of the chapter 11 case, the appointment of a trustee (i.e., a court appointed official who essentially becomes the CEO of the debtor, exercising day-to-day control as he or she deems appropriate) or examiner with expanded powers (i.e., an official appointed by the bankruptcy court to investigate issues or problems identified with the debtor), and other actions taken by American or a third party during the chapter 11 case; and
(iv) the addition of various acknowledgements regarding waiver of the automatic stay.
In addition, Citibank’s lien with respect to American’s collateral provided under the Agreement will be unquestionably effective against the Debtors and will take first priority over other liens on the same collateral. Although American currently does not owe Citibank any cure amounts with respect to the Agreement, the stipulation also provides that American’s liabilities and any amounts American owes under the Agreement will be treated as administrative expenses and will be entitled to high priority payment under the Bankruptcy Code. Finally, American will have no recourse to recover any payments or transfers to Citibank under the Agreement.
Motion of Cantor Fitzgerald for an Order Granting Relief from the Automatic Stay
Cantor Fitzgerald & Co., Cantor Fitzgerald Associates, L.P., Cantor Fitzgerald Brokerage, L.P., Cantor Fitzgerald Europe, Cantor Fitzgerald International, Cantor Fitzgerald Partners, Cantor Fitzgerald Securities, Cantor Fitzgerald L.P., Cantor Index Limited, CO2e.com, LLC, eSpeed Securities, Inc., eSpeed Government Securities, Inc. and Trademark, L.P. (collectively, “Cantor Fitzgerald”) filed a motion seeking relief from the automatic stay to pursue litigation commenced in the United States District Court for the Southern District of New York against American Airlines, Inc. and AMR Corporation (collectively, the “American Airlines Defendants”), and certain other defendants (together with the American Airlines Defendants, the “Defendants”) arising out of the September 11, 2001 terrorist attacks on the World Trade Center buildings (the “9/11 Litigation”).
According to the motion, Cantor Fitzgerald’s complaint asserted property damage (including damage to physical property as well as business interruption and lost profits) sustained as a result of the negligent and/or reckless actions of the Defendants arising out of the September 2001 terrorist attacks. Cantor Fitzgerald alleges that such acts caused, among other things, the physical destruction of Cantor Fitzgerald’s principal place of business, which was located on floors 101 to 105 of Tower One of the World Trade Center, and the resultant loss of life of 658 Cantor Fitzgerald employees.
On or about July 19, 2007, Cantor Fitzgerald, along with several other plaintiffs in the 9/11 Litigation, filed a master complain, alleging negligence and other causes of action against the Defendants arising out of the September 11, 2001 terrorist attacks. On or about October 5, 2007, the American Airlines Defendants filed their master answer to amended complaint. Before the bankruptcy petition was filed, the American Airlines Defendants resolved much of the 9/11 Litigation through settlements with various plaintiffs. However, Cantor Fitzgerald’s claims were not resolved. As of the petition date, the American Airlines Defendants were engaged in discovery and in preparation for trial in the 9/11 Litigation.
As a result of the Debtors’ bankruptcy, the 9/11 Litigation was stayed. By the motion, Cantor Fitzgerald requests relief from the automatic stay so that it may continue to prosecute the 9/11 Litigation (including any appeals) and recover any amounts to which it may be entitled. Cantor Fitzgerald represents that its damages in the 9/11 Litigation can only be recovered from the American Airlines Defendant’s insurance to the extent provided by the American Transportation Safety and System Stabilization Act.
Cantor Fitzgerald represents that it is in the process of negotiating with the American Airlines Defendants regarding a stipulated order granting Cantor Fitzgerald relief from the automatic stay. If such an agreement is reached, Cantor may resolve the motion or may seek to resolve the motion pursuant to the stipulated order.
The hearing on the motion is scheduled for January 27, 2012 at 10:00 a.m. (Eastern). Objections are due by January 24, 2012.
Application to Retain Bain & Company American Eagle
Airlines, Inc., (“Eagle” or the “Debtor”) recently filed an application seeking to retain Bain & Company, Inc. (“Bain”) as a strategic consultant in accordance with the terms and conditions of an engagement letter dated December 14, 2011. According to the application, Bain professionals have expertise and extensive experience in the airline industry and Bain played a major role in the successful transformation of several leading airlines. Bain has developed comprehensive turnaround plans as well as plans to address specific issues, including labor strategy, routing and scheduling, capacity planning, distribution strategy, fleet management, yield management, pricing and regional jet strategy, as well as cost reduction in airport services, maintenance, overhead and purchasing. In addition, Bain has worked with Eagle on three major assignments the past five years and is familiar with company operations, strategy and stakeholders. As such, Bain contends that it has the ability to perform the needed analysis, work productively with both union and management stakeholders, and effectively advise Eagle during its restructuring process.
Bain’s proposed services include the following:
- Labor cost assessment. Bain will develop benchmarking that identifies Eagle’s relative cost position by employee group and calculates the degree of cost advantage or disadvantage. The assessed employee groups will include management, pilots, flight attendants, maintenance, fleet service clerks, dispatch and agents, and, to the extent that data is available, the analysis will cover the major cost drivers of wages and benefits, productivity and seniority. The analysis will develop both top-down (overall cost position) and bottom-up (by employee group) views of the data reviewed by Bain.
- Labor solutions & negotiations support. Bain will help Eagle identify and structure potential labor solutions as part of the restructuring process. Bain will provide analytic support, strategic advice, and advice on best practices during labor negotiations, and will otherwise work with both management and union stakeholders as needed.
- Strategy support. Bain will assist in the ongoing development of Eagle business strategy, including issues such as competitive dynamics, relationships with various stakeholders and market positioning.
The Bain team will be led by two partners, Bill Wade and Chuck Whitten, and supported by a 100% allocated project manager and four 100% allocated consultant resources. Other Bain partners, including Mark Gottfredson and Dave Emerson, will be advisors to the process.
In exchange for its services, the Debtor will compensate Bain in accordance with the terms of the engagement letter, which provides a compensation structure (the “Fee Structure”) in relevant part as follows:
(a) Monthly Fees: Eagle will pay Bain a monthly fee equal to $525,000 per month (the “Monthly Fee”).
(b) Reimbursement of Expenses: Eagle will reimburse Bain for expenses reasonably incurred in connection with and directly related to the provision of Bain’s services. Such expenses may include, but are not limited to, travel expenses, postage, express mail and messenger charges, external market research charges and expenses for “working meals.” Such expenses also include fees and expenses of Bain’s outside counsel incurred in connection with preparation of the engagement letter and approval of Bain’s retention and any fee applications.
(c) Testimony: In the event of a hearing or other court or administrative proceeding under section 1113 of the Bankruptcy Code, Bain agrees that it will produce a Vice-President level employee to testify or otherwise provide reasonable assistance to Eagle in preparing for testimony. There will be no additional charge for providing such testimony if such testimony occurs during the term of Bain’s engagement. However, if testimony is required after the termination of Bain’s engagement, Eagle will pay Bain additional compensation for the time expended by Bain in testifying at such proceedings and related preparation at the rate of $8,720 per day for a Vice-President level employee. Eagle will also reimburse Bain for its reasonable fees and expenses incurred in connection with providing testimony.
Bain intends to file interim and final fee applications with the Court for the allowance of compensation for services rendered and reimbursement of expenses.
The engagement letter also provides for certain indemnification provisions. In short, the Debtor will indemnify and hold harmless Bain (including its affiliates) and the directors, officers, stockholders, agents and employees of Bain (and such affiliates) (collectively, the “Indemnified Parties”) against liabilities arising out of or in connection with its retention by Eagle, except for any liabilities finally judicially determined by a court of competent jurisdiction to have resulted primarily from the gross negligence, willful misconduct, or bad faith of any of Bain or the other indemnified parties. In addition, if indemnification or reimbursement obligations are held to be unavailable by any court (other than circumstances where a court determines that liability is primarily from the gross negligence or intentional misconduct of the indemnified party), the engagement letter allocates contribution obligations based on the relative benefits and faults of Bain and Eagle, subject to a limitation on Bain’s aggregate liability in the amount of its fees received under the engagement letter.
According to the engagement letter, Eagle may terminate the engagement letter at any time and Bain may terminate the engagement at any time provided that such termination is approved by the Bankruptcy Court, otherwise, Bain’s engagement will terminate six (6) months after the start date (i.e., June 14, 2012).
In the six months before the petition date, pursuant to a separate engagement letter, Eagle paid Bain $1,125,000 in professional services fees. As of the petition date, Bain asserts a prepetition claim against Eagle arising from its previous engagement in the amount of $1,925,000. Bain will waive this claim upon entry of an order approving the application.
The hearing on the application is scheduled for January 27, 2012 at 10:00 a.m. (Eastern). Objections are due by January 20, 2012 at 4:00 p.m. (Eastern).
Lowenstein Sandler PC
Sharon L. Levine
S. Jason Teele
Nicole Stefanelli