APFA Special Hotline

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July 16, 2015
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Equity Claim
This week, American announced that it would be making a fourth distribution of shares to labor including APFA from the Disputed Claims Reserve (DCR). As has been previously explained on JetNet and on APFA’s equity website site, http://apfaequity.creditorinfo.com/ during the bankruptcy American contested the validity of a number of claims filed by various entities and individuals. In the event the Bankruptcy Court found any of these claims to be valid, American established a DCR of stock. We’ve shared before that the majority of US-based legacy American employees are eligible to receive 23.6 percent of the shares of common stock in the new company (AAL) distributed to holders of allowed unsecured claims. The majority of these shares were distributed to eligible employees throughout a 120-day period that began in December 2013. During that period, we let you know there could be small distributions beyond Day 120 depending upon the resolution of the DCR. Before today, there were three distributions - the first on July 1, 2014, the second on November 3, 2014, and the third on February 10, 2015.

As a reminder, as disputed unsecured claims are resolved, additional equity will be distributed to creditors (the Creditor Body), and there will be additional distributions of shares to employees when distributions are made to the Creditor Body. The final reconciliation of the DCR is likely to take several years to complete. However, at all measurement points, US-based legacy American’s employee groups will receive 23.6 percent of all shares distributed to the Creditor Body.

APFA explained in a Hotline in January that after the third distribution from the DCR, shares of stock would be distributed at the earlier of when: (1) the number of shares available for distribution is 70,000 or more, or (2) six months from the date of the oldest distribution of shares still held in the Trust other than residual shares.

The example we gave in the Hotline was:
Assume that on March 1, 2015, 20,000 more shares are allocated to APFA and deposited in the APFA Trust Account. At that point the Trust would hold 44,355 shares (20,000 + 24,355). Six months from this date would be September 1, 2015. If at any time during this six-month period there was a subsequent distribution sufficient to reach the 70,000 share threshold, the shares would be allocated to eligible Flight Attendants. If, instead there were no other distributions during these six months or the distribution was not large enough to reach the 70,000 threshold, the shares, whatever the number, would be distributed to eligible Flight Attendants on September 1.

In fact, what happened is on February 10, 2015, a third distribution of 22,976 shares from the DCR were allocated to APFA and deposited in the APFA Trust Account. At that point the Trust held 47,331 shares.  Six months from February 10 is August 10. The number of shares in this fourth DCR distribution is 17,931. Added to those currently held in Trust increases the total to 65,262 (47,331 + 17,931). In addition, at the end of July 1, 2015, 1,367 shares will be withdrawn from the Trust Account to cover APFA’s expenses related to the distribution of shares. The number of shares available for distribution is 63,895 (65,262 – 1,367).

It is now clear that during the six-month period of February 10 to August 10 the share count will not exceed 70,000 shares. Accordingly, on August 10 - the end of the six-month period – all shares in the Trust will be allocated to participants. The only exception is residual shares resulting from the rounding of shares.

For further information please log on to the APFA equity website - http://apfaequity.creditorinfo.com/.

A question that has been asked is if there is another equity distribution separate and apart from the 3% equity Claim provided for in American’s bankruptcy, would APFA adopt the same method it used for the 3% equity Claim.  

In answering that question it is important to remember why APFA decided to use the method that it did back in August 2012.  Based on the recommendation of APFA’s counsel, the APFA Board of Directors determined that the 3% equity Claim would be allocated using a distribution formula based on W-2 earnings from January 1, 2009 through August 31, 2012.

As with any distribution, a key factor in the allocation of the 3% equity Claim, were the existing circumstances. A consideration that was unique in August 2012 was that Flight Attendant wages had remained stagnant during several years of contract negotiations. Consequently, the 3% equity Claim was treated as a form of retroactive pay.

Of course, we cannot predict the facts we will need in order to consider if there is another distribution. Whatever the case may be, APFA, with the advice of counsel, will carefully consider the surrounding circumstances to determine the fairest and most logical way to proceed.