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Hiep’s Finance ‘s final formula for AAMRQ-LCC conversion

December 6, 2013

I don’t have much time to comment much on this merger right now, so I will just go ahead and post what I consider to be the final AAMRQ conversion formula:

AAMRQ stakeholders officially receive 544.4 million AAL shares. Each AAL share is worth an LCC share. Using the approximate number of AAMRQ shares outstanding 335.5 million, and the approximate debt of $8 billion, the share conversion formula is:

AAMRQ = (LCC*544.4 – 8,000) / 335.5 = LCC * 1.623 – $23.85

At the current LCC price of $22.5, each AAMRQ share should be worth $12.67 after the conversion.

Edited 12/12/13: I have posted a detailed explanation of the conversion formula and equity distribution plan here: http://hiepsfinance.com/2013/12/10/aamrq-aal-final-conversion-formula-and-equity-distribution-plan-explained/

 

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19 Comments
  1. Glen Turner permalink

    Richard,

    I am an American Airlines pilot and many of us have been struggling to understand this conversion. Thank you so much for your analysis and time….. excellent work.

    I do have on additional question. Based on your final valuation of $12.67, the deal is structured to pay AAMRQ shareholders over a 120 day period. Do you expect this value ($12.67)to be paid on the effective date (Monday 12/9) or do you expect this to be the vaue after the 120 day period provided AAL maintains an average price of $23.85? My understanding is that only 3.5 percent of total value will be paid on effective date, with additional distributions on day 30,60,90,120 based on the price action of AAL.

    Your opionion would be greatly appreciated.

    Glen

    • Syed Haque permalink

      Glen, If you are an AMR pilot ( employee) then you have the right to get a straight answer from AMR management. The question is simple. whats the conversion rate for each aamrq share for AAL shares after 120 days? You should have the privilege to approach directly to people who came up with the formula within your organization and you should be telling us whats gonna happen. At least thats what I think, Correct me if I’m wrong. Thanks

  2. Juan permalink

    So, after today’s announcement from AMR that each aamrq share equals 0.06 shares in AAL, are current holders of aamrq burned? Each aamrq share is worth about a buck fifty, right?

  3. Ok, so I have sold my 5000 AAMRQ shares at $ 12 last week. Based on the formula above and the opening today at 23.85….how many shares would I have received in total and with hindsight (worth nothing on the stock market haha) should I have hold on to them??

    • We’ll see in 120 days.

      • Ryan permalink

        I’m trying to find a formula for the future distribution. This must be hidden…

      • Ryan,

        What I really want to know is how they decide how much to distribute at each distribution date. I am guessing it depends on the amount of claims settled in each period, but how they plan to resolve the claims is typically not disclosed to outsiders I believe.

  4. tom mccleary permalink

    Sec 8k papers filed today(12/9/13) list debt at 4.95 Billion. What is the rough difference to your 8 billion.

    Thanks for your articles today and back in may..

  5. Are you sure this is correct? There seems to be a whole different formula on yahoo forums that are basing the values off AAL and not LCC

    • Since LCC was exchanged to AAL at a 1:1 ratio, it doesn’t matter which one we’re discussing.

    • mexicanfoodfreak permalink

      p,

      You should provide more info on the source posting on yahoo forum and a url/link.

  6. Dennis permalink

    Thank You for taking the time and effort to explain this. This helps clear the gobble de gook that accountants and attorneys send out.

  7. george roof permalink

    Does the 30 day distribution come from my 1,000 shares I had or my current 66 shares…..

  8. Justin permalink

    The formula calculates a dollar value. Do we then suppose that amount “buys” a share of AAL? At $33, I calculate I get 9/10th of a share of AAL.

    • Hi Justin,

      You are correct. Divide the dollar amount by the AAL share price to get the number of AAL shares.

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