<PAGE> 1
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES OR ACCEPT OFFERS TO BUY THESE
SECURITIES PRIOR TO THE TIME THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS DELIVERED
IN FINAL FORM. THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING
OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-74937
(SUBJECT TO COMPLETION, DATED SEPTEMBER 22, 1999)
PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 30, 1999
$600,000,000
[AMERICAN AIRLINES LOGO]
1999-1 Pass Through Trusts
Pass Through Certificates, Series 1999-1
------------------
American Airlines, Inc. is issuing, through four separate trusts, Class
A-1, Class A-2, Class B and Class C Pass Through Certificates, Series 1999-1.
The proceeds from the sale of Certificates will be used by the trusts to acquire
equipment notes to be issued by American on a full recourse basis. Payments on
the equipment notes held in each trust will be passed through to the holders of
Certificates of such trust. The Certificates represent interests in the assets
of the trusts and do not represent interests in or obligations of American or
any of its affiliates. The Certificates will not be listed on any national
securities exchange.
The equipment notes will be issued for each of 15 Boeing aircraft delivered
to American from June 1998 to September 1999. The equipment notes issued for
each aircraft will be secured by a security interest in such aircraft. Interest
on the equipment notes will be payable semiannually on each April 15 and October
15, beginning April 15, 2000. Principal payments on the equipment notes held for
the Class A-1 Certificates will be scheduled for payment on April 15 and October
15 in certain years, beginning on April 15, 2000 and ending on April 15, 2009.
The entire principal of the equipment notes held for the Class A-2 and Class B
Certificates will be scheduled for payment on October 15, 2009. The entire
principal of the equipment notes held for the Class C Certificates will be
scheduled for payment on October 15, 2004.
The Class A-1 and Class A-2 Certificates will rank equally in right to
distributions and rank senior in right to distributions to the other
Certificates. The Class B Certificates will rank junior in right to
distributions to the Class A-1 and Class A-2 Certificates and will rank senior
in right to distributions to the Class C Certificates. The Class C Certificates
will rank junior in right to distributions to the other Certificates.
Bayerische Landesbank Girozentrale will provide a separate liquidity
facility for each Class of Certificates, in each case in an amount sufficient to
make three semiannual interest distributions on the Certificates of such Class.
INVESTING IN THE CERTIFICATES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE S-15.
<TABLE>
<CAPTION>
PASS THROUGH PRINCIPAL INTEREST FINAL EXPECTED PRICE TO
CERTIFICATES AMOUNT RATE DISTRIBUTION DATE PUBLIC(1)
- ------------ ------------ -------- ----------------- ---------
<S> <C> <C> <C> <C>
Class A-1...................................... $150,889,000 % April 15, 2009 100%
Class A-2...................................... 316,969,000 October 15, 2009 100
Class B........................................ 84,525,000 October 15, 2009 100
Class C........................................ 47,617,000 October 15, 2004 100
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from the date of issuance.
The underwriters will purchase all of the Certificates if any are
purchased. The aggregate proceeds from the sale of the Certificates will be
$600,000,000. American will pay the underwriters a commission of $ .
Delivery of the Certificates in book-entry form only will be made on or about
October , 1999 against payment in immediately available funds.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
Joint Bookrunners
CREDIT SUISSE FIRST BOSTON MORGAN STANLEY DEAN WITTER
-------------------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
The date of this Prospectus Supplement is September , 1999
<PAGE> 2
PRESENTATION OF INFORMATION
These offering materials consist of two documents: (a) this Prospectus
Supplement, which describes the terms of the Certificates that we are currently
offering, and (b) the accompanying Prospectus, which provides general
information about our pass through certificates, some of which may not apply to
the Certificates that we are currently offering. The information in this
Prospectus Supplement replaces any inconsistent information included in the
accompanying Prospectus.
We have given certain capitalized terms specific meanings for purposes of
this Prospectus Supplement. The "Index of Terms" attached as Appendix I to this
Prospectus Supplement lists the page in this Prospectus Supplement on which we
have defined each such term.
At varying places in this Prospectus Supplement and the Prospectus, we
refer you to other sections of such documents for additional information by
indicating the caption heading of such other sections. The page on which each
principal caption included in this Prospectus Supplement and the Prospectus can
be found is listed in the Table of Contents below. All such cross references in
this Prospectus Supplement are to captions contained in this Prospectus
Supplement and not in the Prospectus, unless otherwise stated.
This Prospectus Supplement and the accompanying Prospectus include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which represent American's expectations or beliefs concerning future
events. When used in this Prospectus Supplement and the accompanying Prospectus,
the words "expects," "plans," "anticipates," and similar expressions are
intended to identify forward-looking statements. All forward-looking statements
in this Prospectus Supplement are based upon information available to us on the
date of this Prospectus Supplement. We undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise. Forward-looking statements are subject
to a number of factors that could cause actual results to differ materially from
our expectations. Additional information concerning these and other factors is
contained in our Securities and Exchange Commission filings, including but not
limited to the Form 10-K for the year ended December 31, 1998.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT SUMMARY.......... S-5
Summary of Terms of Certificates..... S-5
Equipment Notes and the Aircraft..... S-6
Loan to Aircraft Value Ratios........ S-7
Cash Flow Structure.................. S-8
The Offering......................... S-9
Summary Consolidated Financial and
Operating Data.................... S-14
RISK FACTORS........................... S-15
Appraisals and Realizable Value of
Aircraft.......................... S-15
Repossession......................... S-15
Priority of Distributions;
Subordination..................... S-15
Control over Collateral; Sale of
Collateral........................ S-16
Ratings of the Certificates.......... S-17
No Protection Against Highly
Leveraged or Extraordinary
Transactions...................... S-17
Limited Ability to Resell the
Certificates...................... S-17
THE COMPANY............................ S-18
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
USE OF PROCEEDS........................ S-18
DESCRIPTION OF THE CERTIFICATES........ S-18
General.............................. S-18
Distribution of Payments on Equipment
Notes............................. S-19
Subordination........................ S-21
Pool Factors......................... S-21
Reports to Certificateholders........ S-23
Indenture Events of Default and
Certain Rights upon an Indenture
Event of Default.................. S-23
Purchase Rights of
Certificateholders................ S-25
PTC Event of Default................. S-25
Merger, Consolidation and Transfer of
Assets............................ S-26
Modification of the Pass Through
Trust Agreements and Certain Other
Agreements........................ S-26
</TABLE>
S-2
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Possible Issuance of Series D
Equipment Notes................... S-29
Termination of the Trusts............ S-29
The Trustees......................... S-29
Book-Entry Registration; Delivery and
Form.............................. S-30
DESCRIPTION OF THE LIQUIDITY
FACILITIES........................... S-31
General.............................. S-31
Drawings............................. S-31
Replacement of Liquidity
Facilities........................ S-32
Reimbursement of Drawings............ S-34
Liquidity Events of Default.......... S-35
Liquidity Provider................... S-36
DESCRIPTION OF THE INTERCREDITOR
AGREEMENT............................ S-36
Intercreditor Rights................. S-36
Priority of Distributions............ S-37
Addition of Trustee for Class D
Certificates...................... S-41
The Subordination Agent.............. S-41
DESCRIPTION OF THE AIRCRAFT AND THE
APPRAISALS........................... S-42
The Aircraft......................... S-42
The Appraisals....................... S-42
DESCRIPTION OF THE EQUIPMENT NOTES..... S-43
General.............................. S-43
Subordination........................ S-43
Principal and Interest Payments...... S-44
Redemption........................... S-44
Security............................. S-45
Loan to Value Ratios of Equipment
Notes............................. S-45
Defeasance........................... S-46
Limitation of Liability.............. S-46
Indenture Events of Default, Notice
and Waiver........................ S-46
Remedies............................. S-47
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Modification of Indentures........... S-49
Indemnification...................... S-49
Certain Provisions of the
Indentures........................ S-50
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES......................... S-54
General.............................. S-54
Sales of Certificates................ S-54
Effect of Subordination on
Subordinated Certificate Owners... S-55
Bond Premium......................... S-55
Original Issue Discount.............. S-55
Certain Federal Income Tax
Consequences to Foreign
Certificateholders................ S-56
Backup Withholding................... S-56
CERTAIN CONNECTICUT TAXES.............. S-57
CERTAIN ERISA CONSIDERATIONS........... S-57
General.............................. S-57
Plan Assets Issues................... S-58
Prohibited Transaction Exemptions.... S-58
Special Considerations Applicable To
Insurance Company General
Accounts.......................... S-58
UNDERWRITING........................... S-60
NOTICE TO CANADIAN RESIDENTS........... S-61
Resale Restrictions.................. S-61
Representations of Purchasers........ S-61
Rights of Action (Ontario
Purchasers)....................... S-62
Enforcement of Legal Rights.......... S-62
Notice to British Columbia
Residents......................... S-62
Taxation and Eligibility for
Investment........................ S-62
LEGAL OPINIONS......................... S-62
EXPERTS................................ S-63
INDEX OF TERMS.....................Appendix I
APPRAISAL LETTERS.................Appendix II
EQUIPMENT NOTE PRINCIPAL
PAYMENTS.......................Appendix III
LOAN TO VALUE RATIOS
OF EQUIPMENT NOTES..............Appendix IV
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ABOUT THIS PROSPECTUS.................. 2
WHERE YOU CAN FIND MORE INFORMATION.... 2
THE COMPANY............................ 4
RATIO OF EARNINGS TO FIXED CHARGES..... 4
FORMATION OF THE TRUSTS................ 4
USE OF PROCEEDS........................ 5
DESCRIPTION OF THE PASS THROUGH
CERTIFICATES......................... 5
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General.............................. 6
Book-Entry Registration.............. 8
Payments and Distributions........... 11
Pool Factors......................... 12
Reports to Certificateholders........ 12
Voting of Equipment Notes............ 13
Events of Default and Certain Rights
upon an Event of Default.......... 13
Modifications of the Basic
Agreement......................... 15
</TABLE>
S-3
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Modification of Indenture and Related
Agreements........................ 17
Termination of the Trusts............ 17
Delayed Purchase of Equipment
Notes............................. 17
Merger, Consolidation and Transfer of
Assets............................ 18
The Trustee.......................... 18
DESCRIPTION OF THE EQUIPMENT NOTES..... 18
General.............................. 19
Principal and Interest Payments...... 20
Redemption........................... 20
Security............................. 20
Additional Notes..................... 22
Payments and Limitation of
Liability......................... 22
Defeasance of the Indentures and the
Equipment Notes in Certain
Circumstances..................... 23
Assumption of Obligations by
American.......................... 23
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Owner Participant; Revisions to
Agreements........................ 23
CREDIT ENHANCEMENTS.................... 24
Ranking; Cross-Subordination......... 24
Liquidity Facility................... 24
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES......................... 24
General.............................. 25
Sales of Pass Through Certificates... 25
Bond Premium......................... 25
Original Issue Discount.............. 26
Backup Withholding................... 26
CERTAIN CONNECTICUT TAXES.............. 26
ERISA CONSIDERATIONS................... 26
PLAN OF DISTRIBUTION................... 27
LEGAL OPINIONS......................... 28
EXPERTS................................ 28
</TABLE>
---------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND THE DOCUMENTS INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR TO WHICH WE HAVE
REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS DIFFERENT. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION,
YOU SHOULD NOT RELY ON IT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL TO
SELL THESE SECURITIES. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE OF THIS PROSPECTUS SUPPLEMENT. ALSO, YOU SHOULD NOT ASSUME
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AMERICAN SINCE THE DATE OF THIS
PROSPECTUS SUPPLEMENT.
S-4
<PAGE> 5
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information from this Prospectus
Supplement and the accompanying Prospectus and may not contain all of the
information that is important to you. For more complete information about the
Certificates and American Airlines, Inc., you should read this entire Prospectus
Supplement and the accompanying Prospectus, as well as the materials filed with
the Securities and Exchange Commission that are considered to be part of such
Prospectus. See "Where You Can Find More Information" in the Prospectus. Unless
otherwise indicated, "we," "us," "our" and similar terms, as well as references
to "American" or the "Company", refer to American Airlines, Inc. The term "you"
refers to prospective investors in the Certificates.
SUMMARY OF TERMS OF CERTIFICATES
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS B CLASS C
CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Aggregate face amount............... $150,889,000 $316,969,000 $84,525,000 $47,617,000
Ratings:............................
Moody's........................... Aa1 Aa1 Aa3 A1
Standard & Poor's................. AAA AAA AA- A
Initial loan to Aircraft value
(cumulative)(1)................... 47.0% 47.0% 55.5% 60.3%
Expected maximum loan to Aircraft
value (cumulative)................ 47.0% 47.0% 57.0% 60.6%
Expected principal distribution
window (in years)................. 0.5-9.5 10.0 10.0 5.0
Initial average life (in years)..... 4.5 10.0 10.0 5.0
Regular Distribution Dates.......... April 15 and April 15 and April 15 and April 15 and
October 15 October 15 October 15 October 15
Final expected regular distribution
date.............................. April 15, October 15, October 15, October 15,
2009 2009 2009 2004
Final Legal Distribution Date....... October 15, April 15, April 15, April 15,
2010 2011 2011 2006
Minimum denomination................ $1,000 $1,000 $1,000 $1,000
Section 1110 protection............. Yes Yes Yes Yes
Liquidity Facility coverage......... 3 semiannual 3 semiannual 3 semiannual 3 semiannual
interest interest interest interest
payments payments payments payments
</TABLE>
- ---------------
(1) The initial aggregate appraised value of the Aircraft is $995,442,667. See
"Loan To Aircraft Value Ratios" in this Prospectus Supplement Summary for
the method we used in calculating the loan to Aircraft value ratios.
S-5
<PAGE> 6
EQUIPMENT NOTES AND THE AIRCRAFT
The Trusts will hold Equipment Notes issued for each of 15 Boeing aircraft,
consisting of ten Boeing 737-823 aircraft, three Boeing 767-323ER aircraft and
two Boeing 777-223 aircraft. All the Aircraft have been delivered and are being
operated by American. The Equipment Notes issued with respect to each Aircraft
will be secured by a security interest in such Aircraft. See "Description of the
Aircraft and the Appraisals" for a description of the Aircraft. Set forth below
is certain information about the Equipment Notes to be held in the Trusts and
the Aircraft.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
REGISTRATION DATE OF EQUIPMENT APPRAISED BASE
AIRCRAFT TYPE NUMBER DELIVERED NOTES VALUE(1)
- ------------- ------------ --------- ---------------- --------------
<S> <C> <C> <C> <C>
Boeing 737-823....................... N908AN 05/13/1999 $ 27,816,233 $ 46,253,333
Boeing 737-823....................... N909AN 05/19/1999 27,818,238 46,256,667
Boeing 737-823....................... N910AN 05/26/1999 27,818,238 46,256,667
Boeing 737-823....................... N912AN 06/25/1999 27,848,307 46,306,667
Boeing 737-823....................... N914AN 07/19/1999 28,178,001 46,447,667
Boeing 737-823....................... N915AN 07/28/1999 28,180,023 46,451,000
Boeing 737-823....................... N916AN 08/05/1999 28,198,223 46,481,000
Boeing 737-823....................... N917AN 08/27/1999 28,198,223 46,481,000
Boeing 737-823....................... N918AN 09/10/1999 28,216,422 46,511,000
Boeing 737-823....................... N919AN 09/15/1999 28,216,422 46,511,000
Boeing 767-323ER..................... N394AN 06/13/1998 51,787,440 86,310,000
Boeing 767-323ER..................... N398AN 04/30/1999 54,151,046 90,043,333
Boeing 767-323ER..................... N399AN 05/28/1999 54,211,185 90,143,333
Boeing 777-223....................... N778AN 06/21/1999 79,677,993 132,490,000
Boeing 777-223....................... N779AN 06/27/1999 79,684,007 132,500,000
</TABLE>
- ---------------
(1) The appraised base value of each Aircraft set forth above is the lesser of
the average and median appraised base values of such Aircraft as appraised
by three independent appraisal and consulting firms. Such appraisals are
based upon varying assumptions (which may not reflect current market
conditions) and methodologies. An appraisal is only an estimate of value and
should not be relied upon as a measure of realizable value. See "Risk
Factors -- Appraisals and Realizable Value of Aircraft".
S-6
<PAGE> 7
LOAN TO AIRCRAFT VALUE RATIOS
The following table sets forth loan to Aircraft value ratios ("LTVs") for
each Class of Certificates as of the issuance date of the Certificates and each
October 15 Regular Distribution Date. The table should not be considered a
forecast or prediction of expected or likely LTVs but simply a mathematical
calculation based upon one set of assumptions. See "Risk Factors -- Appraisals
and Realizable Value of Aircraft".
The following table was compiled on an aggregate basis. However, the
Equipment Notes secured by an Aircraft will not be secured by any other
Aircraft. This means that any excess proceeds realized from the sale of an
Aircraft or other exercise of default remedies will not be available to cover
any shortfalls on the Equipment Notes relating to any other Aircraft. See
"Description of the Equipment Notes -- Loan to Value Ratios of Equipment Notes"
and Appendix IV for LTVs for the Equipment Notes issued in respect of individual
Aircraft, which may be more relevant in a default situation than the aggregate
values shown below.
<TABLE>
<CAPTION>
AGGREGATE OUTSTANDING POOL BALANCE(2) LTV(3)
ASSUMED --------------------------------------------------------- ---------------------------
AIRCRAFT CLASS A-1 CLASS A-2 CLASS B CLASS C CLASS A-1 CLASS A-2
DATE VALUE(1) CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
- ---- ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
October , 1999...... $995,442,667 $150,889,000 $316,969,000 $84,525,000 $47,617,000 47.0% 47.0%
October 15, 2000..... 965,499,305 117,505,634 316,969,000 84,525,000 47,617,000 45.0 45.0
October 15, 2001..... 935,555,944 104,031,121 316,969,000 84,525,000 47,617,000 45.0 45.0
October 15, 2002..... 905,612,582 90,556,609 316,969,000 84,525,000 47,617,000 45.0 45.0
October 15, 2003..... 875,669,221 77,082,096 316,969,000 84,525,000 47,617,000 45.0 45.0
October 15, 2004..... 845,725,859 63,607,583 316,969,000 84,525,000 0 45.0 45.0
October 15, 2005..... 815,782,498 50,133,071 316,969,000 84,525,000 0 45.0 45.0
October 15, 2006..... 785,839,137 36,658,558 316,969,000 84,525,000 0 45.0 45.0
October 15, 2007..... 755,895,775 23,184,045 316,969,000 84,525,000 0 45.0 45.0
October 15, 2008..... 725,952,414 9,709,533 316,969,000 84,525,000 0 45.0 45.0
October 15, 2009..... 0 0 0 0 0 NA NA
<CAPTION>
LTV(3)
---------------------------
CLASS B CLASS C
DATE CERTIFICATES CERTIFICATES
- ---- ------------ ------------
<S> <C> <C>
October , 1999...... 55.5% 60.3%
October 15, 2000..... 53.8 58.7
October 15, 2001..... 54.0 59.1
October 15, 2002..... 54.3 59.6
October 15, 2003..... 54.7 60.1
October 15, 2004..... 55.0 NA
October 15, 2005..... 55.4 NA
October 15, 2006..... 55.8 NA
October 15, 2007..... 56.2 NA
October 15, 2008..... 56.6 NA
October 15, 2009..... NA NA
</TABLE>
- ---------------
(1) In calculating the aggregate Assumed Aircraft Value, we have assumed that
the initial appraised base value of each Aircraft, determined as described
under "-- Equipment Notes and the Aircraft", declines by 3% of the initial
appraised base value per year. Other rates or methods of depreciation may
result in materially different LTVs. We cannot assure you that the
depreciation rate and method assumed for purposes of the table are the ones
most likely to occur or predict the actual future value of any Aircraft. See
"Risk Factors -- Appraisals and Realizable Value of Aircraft".
(2) The "pool balance" for each Class of Certificates indicates, as of any date,
the portion of the original face amount of such Class of Certificates that
has not been distributed to Certificateholders.
(3) The LTVs for each Class of Certificates were obtained for each October 15
Regular Distribution Date by dividing (i) the expected outstanding pool
balance of such Class together with the expected outstanding pool balance of
all other Classes ranking equal or senior in right to distributions to such
Class after giving effect to the distributions expected to be made on such
date, by (ii) the assumed value of all of the Aircraft on such date based on
the assumptions described above.
S-7
<PAGE> 8
CASH FLOW STRUCTURE
Set forth below is a diagram illustrating the structure for the offering of
the Certificates and certain cash flows.
[CHART]
- ---------------
(1) American will issue Series A-1, Series A-2, Series B and Series C Equipment
Notes in respect of each Aircraft. Each Aircraft will be subject to a
separate Indenture.
(2) Separate Liquidity Facilities are available with respect to each Class of
Certificates for up to three semiannual interest distributions on the
Certificates of such Class.
S-8
<PAGE> 9
THE OFFERING
Trusts..................... The Class A-1 Trust, the Class A-2 Trust, the Class
B Trust and the Class C Trust each will be formed
pursuant to a separate trust supplement to a basic
pass through trust agreement between American and
State Street Bank and Trust Company of Connecticut,
National Association, as trustee under each trust.
Certificates Offered....... - Class A-1 Certificates
- Class A-2 Certificates
- Class B Certificates
- Class C Certificates
Each Class of Certificates will represent
fractional undivided interests in the related
Trust.
Use of Proceeds............ The proceeds from the sale of the Certificates of
each Trust will be used to acquire the Equipment
Notes to be held by such Trust. The Equipment Notes
will be full recourse obligations of American.
American will issue the Equipment Notes under 15
separate Indentures. The proceeds from issuance of
the Equipment Notes under each Indenture will be
used to finance American's acquisition of various
aircraft delivered or to be delivered in 1999.
Subordination Agent,
Trustee and Loan Trustee... State Street Bank and Trust Company of Connecticut,
National Association.
Liquidity Provider......... Initially, Bayerische Landesbank Girozentrale.
Trust Property............. The property of each Trust will include:
- Equipment Notes acquired by such Trust.
- All rights of such Trust under the Intercreditor
Agreement described below (including all monies
receivable pursuant to such rights).
- All monies receivable under the Liquidity
Facility for such Trust.
- Funds from time to time deposited with the
Trustee in accounts relating to such Trust.
Regular Distribution
Dates...................... April 15 and October 15, commencing on April 15,
2000.
Record Dates............... The fifteenth day preceding the related
Distribution Date.
Distributions.............. The Trustee will distribute all payments of
principal, Make-Whole Amount (if any) and interest
received on the Equipment Notes held in each Trust
to the holders of the Certificates of such Trust,
subject to the subordination provisions applicable
to the Certificates.
Scheduled payments of principal and interest made
on the Equipment Notes will be distributed on the
applicable Regular Distribution Dates. Payments of
principal, Make-Whole Amount (if any) and interest
made on the Equipment Notes resulting from any
early redemption of such Equipment Notes will be
distributed on a Special Distribution Date after
not less than 15 days' notice to
Certificateholders.
S-9
<PAGE> 10
Intercreditor Agreement.... The Trusts, the Liquidity Provider and the
Subordination Agent will enter into the
Intercreditor Agreement. The Intercreditor
Agreement states how payments made on the Equipment
Notes and the Liquidity Facilities will be
distributed among the Trusts and the Liquidity
Provider. The Intercreditor Agreement also sets
forth agreements among the Trusts and the Liquidity
Provider relating to who will control the exercise
of remedies under the Equipment Notes and the
Indentures.
Subordination.............. Under the Intercreditor Agreement, after the
Liquidity Provider is reimbursed (if necessary) and
certain other fees and expenses are paid,
distributions on the Certificates generally will be
made in the following order:
- First, to the holders of the Class A-1 and Class
A-2 Certificates.
- Second, to the holders of the Class B
Certificates.
- Third, to the holders of the Class C
Certificates.
However, if American is in bankruptcy or other
specified defaults have occurred but American is
continuing to meet certain of its payment
obligations, the subordination provisions
applicable to the Certificates permit distributions
to be made on junior Certificates prior to making
distributions in full on the more senior
Certificates.
Control of Loan Trustee.... The holders of at least a majority of the
outstanding principal amount of Equipment Notes
issued under each Indenture will be entitled to
direct the Loan Trustee under such Indenture in
taking action as long as no Indenture Event of
Default is continuing thereunder. If an Indenture
Event of Default is continuing under such
Indenture, subject to certain conditions, the
Controlling Party will direct the Loan Trustee in
taking action under such Indenture (including in
exercising remedies, such as accelerating such
Equipment Notes or foreclosing the lien on the
Aircraft securing such Equipment Notes).
The Controlling Party will be:
- The Class A-1 Trustee or Class A-2 Trustee,
whichever represents the Class with the larger
Pool Balance of Certificates outstanding at the
time the Indenture Event of Default occurs.
- Upon payment of Final Distributions to the
holders of such larger Class, the other of the
Class A-1 Trustee or Class A-2 Trustee.
- Upon payment of Final Distributions to the
holders of Class A-1 and Class A-2 Certificates,
the Class B Trustee.
- Upon payment of Final Distributions to the
holders of Class B Certificates, the Class C
Trustee.
- Under certain circumstances, and notwithstanding
the foregoing, the Liquidity Provider with the
greatest amount owed to it.
In exercising remedies during the nine months after
the earlier of (a) the acceleration of the
Equipment Notes issued pursuant to any Indenture or
(b) the bankruptcy of American, the Controlling
Party may not, without the consent of each Trustee,
sell such Equipment
S-10
<PAGE> 11
Notes or the Aircraft subject to the lien of such
Indenture for less than certain specified minimums.
Right to Buy Other Classes
of Certificates............ If American is in bankruptcy or certain other
specified events have occurred, Certificateholders
will have the right to buy certain other Classes of
Certificates on the following basis:
- If either the Class A-1 or Class A-2
Certificateholders are then represented by the
Controlling Party, the Certificateholders of such
Class that is not so represented will have the
right to purchase all, but not less than all, of
the Certificates of such Class that is so
represented.
- The Class B Certificateholders will have the
right to purchase all, but not less than all, of
the Class A-1 and Class A-2 Certificates.
- The Class C Certificateholders will have the
right to purchase all, but not less than all, of
the Class A-1, Class A-2 and Class B
Certificates.
The purchase price in each case described above
will be the outstanding balance of the applicable
Class of Certificates plus accrued and
undistributed interest.
Liquidity Facilities....... Under the Liquidity Facility for each Trust, the
Liquidity Provider will, if necessary, make
advances in an aggregate amount sufficient to pay
interest distributions on the applicable Class of
Certificates on up to three successive semiannual
Regular Distribution Dates at the applicable
interest rate for such Certificates. The Liquidity
Facilities cannot be used to pay any other amount
in respect of the Certificates.
Notwithstanding the subordination provisions
applicable to the Certificates, the holders of the
Certificates issued by each Trust will be entitled
to receive and retain the proceeds of drawings
under the Liquidity Facility for such Trust.
Upon each drawing under any Liquidity Facility to
pay interest distributions on any of the
Certificates, the Subordination Agent will be
obligated to reimburse the applicable Liquidity
Provider for the amount of such drawing, together
with interest on such drawing. Such reimbursement
obligation and all interest, fees and other amounts
owing to the Liquidity Provider under each
Liquidity Facility will rank senior to all of the
Certificates in right of payment.
Equipment Notes
(a) Issuer................. Under each Indenture, American will issue Series
A-1, Series A-2, Series B and Series C Equipment
Notes, which will be acquired, respectively, by the
Class A-1, Class A-2, Class B and Class C Trusts.
(b) Interest............... The Equipment Notes held in each Trust will accrue
interest at the rate per annum for the Certificates
issued by such Trust set forth on the cover page of
this Prospectus Supplement. Interest on the
Equipment Notes will be payable on April 15 and
October 15 of each year, commencing on April 15,
2000. Interest will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
S-11
<PAGE> 12
(c) Principal.............. Amortizing Notes. Principal payments on the Series
A-1 Equipment Notes are scheduled to be received in
specified amounts on April 15 and October 15 in
certain years, commencing on April 15, 2000 and
ending on April 15, 2009.
Bullet Maturity Notes. The entire principal amounts
of the Series A-2 and Series B Equipment Notes are
scheduled to be paid on October 15, 2009. The
entire principal amount of the Series C Equipment
Notes is scheduled to be paid on October 15, 2004.
(d) Redemption............. Aircraft Event of Loss. If an Event of Loss occurs
with respect to an Aircraft, all of the Equipment
Notes issued with respect to such Aircraft will be
redeemed, unless such Aircraft is replaced by
American under the related Indenture. The
redemption price in such case will be the unpaid
principal amount of such Equipment Notes, together
with accrued interest, but without any Make-Whole
Amount. See "Description of the Equipment
Notes -- Redemption".
Optional Redemption. American may elect to redeem
at any time all of the Equipment Notes issued with
respect to an Aircraft prior to maturity. The
redemption price in such case will be the unpaid
principal amount of such Equipment Notes, together
with accrued interest, plus a Make-Whole Amount.
See "Description of the Equipment
Notes -- Redemption".
(e) Security............... The Equipment Notes issued with respect to each
Aircraft will be secured by a security interest in
such Aircraft.
The Equipment Notes will not be
cross-collateralized. This means that the Equipment
Notes secured by an Aircraft will not be secured by
any other Aircraft. Any excess proceeds from the
sale of an Aircraft or other exercise of default
remedies with respect to such Aircraft will not be
available to cover any shortfalls on the Equipment
Notes relating to any other Aircraft.
By virtue of the Intercreditor Agreement, the
Equipment Notes will be effectively
cross-subordinated. This means that payments
received on a junior series of Equipment Notes
issued in respect of one Aircraft may be applied in
accordance with the priority of payment provisions
set forth in the Intercreditor Agreement to make
distributions in respect of a more senior Class of
Certificates.
There will not be cross-default provisions in the
Indentures. This means that if the Equipment Notes
issued with respect to one or more Aircraft are in
default and the Equipment Notes issued with respect
to the remaining Aircraft are not in default, no
remedies will be exercisable with respect to the
remaining Aircraft.
(f) Section 1110
Protection................. American's General Counsel will provide an opinion
to the Trustees that the benefits of Section 1110
of the Bankruptcy Code will be available with
respect to each of the Aircraft.
Certain Federal Income Tax
Consequences............. The Trusts themselves will not be subject to
federal income tax. Each Certificate Owner should
report on its federal income tax return its pro
rata share of the income from the Equipment Notes
and other property held by the relevant Trust, in
accordance with such
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<PAGE> 13
Certificate Owner's method of accounting. See
"Certain Federal Income Tax Consequences".
Certain ERISA
Considerations............. Each person who acquires a Certificate will be
deemed to have represented that either:
- no assets of an employee benefit plan or an
individual retirement account or of any trust
established under such a plan or account have
been used to purchase such Certificate; or
- the purchase and holding of such Certificate by
such person are exempt from the prohibited
transaction restrictions of the Employee
Retirement Income Security Act of 1974 and the
Internal Revenue Code of 1986 pursuant to one or
more prohibited transaction statutory or
administrative exemptions.
See "Certain ERISA Considerations".
Ratings of the
Certificates............... It is a condition to the issuance of the
Certificates that the Certificates be rated by
Moody's and Standard & Poor's at not less than the
ratings set forth below:
<TABLE>
<CAPTION>
STANDARD
CERTIFICATES MOODY'S & POOR'S
------------ ------- --------
<S> <C> <C> <C>
Class A-1.................................. Aa1 AAA
Class A-2.................................. Aa1 AAA
Class B.................................... Aa3 AA-
Class C.................................... A1 A
</TABLE>
A rating is not a recommendation to purchase, hold
or sell Certificates; and such rating does not
address market price or suitability for a
particular investor. There can be no assurance that
such ratings will not be lowered or withdrawn by a
Rating Agency. See "Risk Factors -- Ratings of the
Certificates".
<TABLE>
<S> <C> <C> <C>
Threshold Rating Requirements for the STANDARD
Liquidity Provider................... CERTIFICATES MOODY'S & POOR'S
------------------------------------------- --- ----
Class A-1.................................. P-1 A-1+
Class A-2.................................. P-1 A-1+
Class B.................................... P-1 A-1+
Class C.................................... P-1 A-1
</TABLE>
Liquidity Provider
Rating..................... The initial Liquidity Provider meets the Threshold
Rating requirement for each Class of Certificates.
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<PAGE> 14
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents summary consolidated financial data and
certain operating data of American. The annual historical financial data were
derived from American's audited consolidated financial statements and the notes
thereto, incorporated by reference in the Prospectus accompanying this
Prospectus Supplement and should be read in conjunction therewith. The
consolidated financial data for the interim periods ended June 30, 1999 and 1998
were derived from unaudited consolidated financial statements of American,
incorporated by reference in the Prospectus accompanying this Prospectus
Supplement and should be read in conjunction therewith. The data for such
interim periods may not be indicative of results for the year as a whole. See
"Where You Can Find More Information" in the Prospectus accompanying this
Prospectus Supplement.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ------------------------------
1999 1998 1998 1997 1996
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (IN MILLIONS):
Revenues
Passenger............................................... $ 7,071 $ 7,367 $ 14,695 $ 14,310 $ 13,645
Cargo................................................... 305 328 649 678 672
Other................................................... 507 458 955 868 819
Expenses.................................................. 7,492 7,207 14,531 14,409 13,805
Operating income.......................................... 391 946 1,768 1,447 1,331
Other income (expense), net............................... 33 (40) (24) (160) (375)
Earnings before income taxes.............................. 424 906 1,744 1,287 956
Net earnings.............................................. $ 251 $ 552 $ 1,063 $ 780 $ 705
OTHER DATA:
Ratio of earnings to fixed charges........................ 1.74 2.88 2.82 2.27 1.88
OPERATING STATISTICS:
Scheduled Service:
Available seat miles (millions)(1)...................... 78,109 76,670 155,297 153,917 152,886
Revenue passenger miles (millions)(2)................... 54,198 53,311 108,955 107,026 104,710
Passenger load factor (%)(3)............................ 69.4 69.5 70.2 69.5 68.5
Passenger revenue yield per passenger mile (cents)(4)... 13.05 13.82 13.49 13.37 13.03
Passenger revenue per available seat mile (cents)....... 9.05 9.61 9.46 9.30 8.92
Operating expenses per available seat mile (cents)........ 9.46 9.30 9.25 9.27 8.91
Cargo ton miles (millions)(5)............................. 942 1,005 1,974 2,032 2,028
Cargo revenue yield per ton mile (cents).................. 32.36 32.65 32.85 33.78 33.14
</TABLE>
<TABLE>
<CAPTION>
AT AT
JUNE 30, DECEMBER 31,
1999 1998
-------- ------------
<S> <C> <C>
BALANCE SHEET DATA (IN MILLIONS):
Cash, cash equivalents and unrestricted short-term
investments............................................. $ 1,171 $ 1,483
Total assets.............................................. 20,307 19,224
Current liabilities....................................... 5,443 5,325
Long-term debt, less current maturities................... 1,489 920
Obligations under capital leases, less current
obligations............................................. 1,474 1,542
Stockholders' equity...................................... 6,673 6,428
</TABLE>
- ---------------
(1) "Available seat miles" represents the number of seats available for
passengers multiplied by the number of scheduled miles the seats are flown.
(2) "Revenue passenger miles" represents the number of miles flown by revenue
passengers in scheduled service.
(3) "Passenger load factor" is calculated by dividing revenue passenger miles by
available seat miles, and represents the percentage of aircraft seating
capacity utilized.
(4) "Revenue yield per passenger mile" represents the average revenue received
from each mile a passenger is flown in scheduled service.
(5) "Cargo ton miles" represents the tonnage of freight and mail carried
multiplied by the number of miles flown.
S-14
<PAGE> 15
RISK FACTORS
You should carefully consider the following risk factors as well as other
information contained in this Prospectus Supplement and the accompanying
Prospectus.
APPRAISALS AND REALIZABLE VALUE OF AIRCRAFT
Three independent appraisal and consulting firms have prepared appraisals
of the Aircraft. The appraisal letters are annexed to this Prospectus Supplement
as Appendix II. Such appraisals, which are based on the base value of the
Aircraft, rely on varying assumptions and methodologies (which may differ among
the appraisers), and may not reflect current market conditions that could affect
the current market value of the Aircraft. Base value is the theoretical value
for an aircraft that assumes a balanced market, while current market value is
the value for an aircraft in the actual market. The appraisals were prepared
without a physical inspection of the Aircraft. Appraisals that are based on
other assumptions and methodologies may result in valuations that are materially
different from those contained in such appraisals. See "Description of the
Aircraft and the Appraisals -- The Appraisals".
An appraisal is only an estimate of value. It does not necessarily indicate
the price at which an aircraft may be purchased from the aircraft manufacturer.
Nor should an appraisal be relied upon as a measure of realizable value. The
proceeds realized upon a sale of any Aircraft may be less than its appraised
value. The value of an Aircraft if remedies are exercised under the applicable
Indenture will depend on various factors, including:
- market and economic conditions;
- the supply of similar aircraft;
- the availability of buyers;
- the condition of the Aircraft; and
- whether the Aircraft are sold separately or as a block.
Accordingly, we cannot assure you that the proceeds realized upon any such
exercise of remedies would be sufficient to satisfy in full payments due on the
Equipment Notes relating to such Aircraft or the full amount of distributions
expected on the Certificates.
REPOSSESSION
There will be no general geographic restrictions on our ability to operate
the Aircraft. Although we do not currently intend to do so, we will be permitted
to register the Aircraft in certain foreign jurisdictions and to lease the
Aircraft. It may be difficult, time-consuming and expensive for the Loan Trustee
to exercise its repossession rights if an Aircraft is located outside the United
States, is registered in a foreign jurisdiction or is leased to a foreign or
domestic operator. Additional difficulties may exist when a lessee is the
subject of a bankruptcy, insolvency or similar event.
In addition, certain jurisdictions may allow for certain other liens or
other third party rights to have priority over the related Loan Trustee's
security interest in an Aircraft. As a result, the benefits of the related Loan
Trustee's security interest in an Aircraft may be less than they would be if
such Aircraft were located or registered in the United States.
PRIORITY OF DISTRIBUTIONS; SUBORDINATION
Under the Intercreditor Agreement, the Liquidity Provider will receive
payment of all amounts owed to it (including reimbursement of drawings made to
pay interest on more junior Classes of Certificates) before the holders of any
Class of Certificates receive any funds. In addition, in certain default
situations the Subordination Agent and the Trustees will receive certain
payments before the holders of any Class of Certificates receive distributions.
See "Description of the Intercreditor Agreement -- Priority of Distributions".
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<PAGE> 16
Certain Classes of Certificates are subordinated to other Classes in rights
to distributions. See "Description of the Certificates -- Subordination".
Consequently, a payment default under any Equipment Note or a Triggering Event
may cause the distribution to more senior Classes of Certificates of payments
received on one or more junior series of Equipment Notes. If this should occur,
the interest accruing on the remaining Equipment Notes may be less than the
amount of interest expected to be distributed on the remaining Certificates of
more junior Classes. This is because the interest that Certificates of junior
Classes are expected to receive may accrue at a higher rate than interest on the
remaining Equipment Notes. As a result of this possible interest shortfall, the
holders of one or more junior Classes of Certificates may not receive the full
amount expected after a payment default under any Equipment Note even if all
Equipment Notes are eventually paid in full.
However, if American is in bankruptcy or other specified defaults have
occurred but American is continuing to meet certain of its payment obligations
and the applicable loan to Aircraft value tests are met, the subordination
provisions applicable to the Certificates permit distributions to be made to
junior Certificates prior to making distributions in full on more senior
Certificates. This could include distributions in respect of the principal paid
at maturity of the Series C Equipment Notes held in the Class C Trust.
CONTROL OVER COLLATERAL; SALE OF COLLATERAL
If an Indenture Event of Default is continuing, subject to certain
conditions, the Loan Trustee under the related Indenture will be directed by the
Controlling Party in exercising remedies under such Indenture, including
accelerating the applicable Equipment Notes or foreclosing the lien on the
Aircraft securing such Equipment Notes. See "Description of the
Certificates -- Indenture Events of Default and Certain Rights upon an Indenture
Event of Default".
The Controlling Party will be:
- the Class A-1 Trustee or Class A-2 Trustee, whichever represents the
Class with the larger Pool Balance of Certificates outstanding at the
time the Indenture Event of Default occurs;
- upon payment of Final Distributions to the holders of such larger Class,
the other of the Class A-1 Trustee or Class A-2 Trustee;
- upon payment of Final Distributions to the holders of Class A-1 and Class
A-2 Certificates, the Class B Trustee;
- upon payment of Final Distributions to the holders of Class B
Certificates, the Class C Trustee; and
- under certain circumstances, and notwithstanding the foregoing, the
Liquidity Provider with the greatest amount owed to it.
During the continuation of any Indenture Event of Default, the Controlling
Party may accelerate the Equipment Notes issued under the related Indenture and
sell such Equipment Notes or the related Aircraft, subject to certain
limitations. See "Description of the Intercreditor Agreement -- Intercreditor
Rights -- Sale of Equipment Notes or Aircraft". The market for Equipment Notes
during any Indenture Event of Default may be very limited, and we cannot assure
you as to the price at which they could be sold. If the Controlling Party sells
any Equipment Notes for less than their outstanding principal amount, certain
Certificateholders will receive a smaller amount of principal distributions than
anticipated and will not have any claim for the shortfall against us or any
Trustee.
In addition, the Equipment Notes will not be cross-collateralized. This
means that the Equipment Notes secured by an Aircraft will not be secured by any
other Aircraft. Accordingly, any proceeds realized from the sale of an Aircraft
or other exercise of default remedies with respect to such Aircraft in excess of
the principal amount of the Equipment Notes related to such Aircraft will not be
available to cover
S-16
<PAGE> 17
shortfalls, if any, on the Equipment Notes relating to any other Aircraft. See
"Description of the Equipment Notes -- Remedies".
RATINGS OF THE CERTIFICATES
It is a condition to the issuance of the Certificates that the Class A-1
and A-2 Certificates be rated not lower than Aa1 by Moody's Investors Service,
Inc. ("Moody's") and AAA by Standard & Poor's Ratings Services, a division of
McGraw-Hill Companies, Inc. ("Standard & Poor's", and together with Moody's, the
"Rating Agencies"), the Class B Certificates be rated not lower than Aa3 by
Moody's and AA- by Standard & Poor's and the Class C Certificates be rated not
lower than A1 by Moody's and A by Standard & Poor's. A rating is not a
recommendation to purchase, hold or sell Certificates; and such rating does not
address market price or suitability for a particular investor. A rating may not
remain for any given period of time and may be lowered or withdrawn entirely by
a Rating Agency if in its judgment circumstances in the future (including the
downgrading of American or the Liquidity Provider) so warrant.
The rating of each Class of the Certificates is based primarily on the
default risk of the Equipment Notes held for such Class, the availability of the
Liquidity Facility for the benefit of holders of such Certificates, the
collateral value provided by the Aircraft securing such Equipment Notes and the
subordination provisions applicable to such Certificates. The foregoing ratings
address the likelihood of timely payment of interest when due on the
Certificates and the ultimate payment of principal of the Certificates by the
Final Legal Distribution Date. Such ratings do not address the possibility of
certain defaults, voluntary redemptions or other circumstances (such as a loss
event to an Aircraft) which could result in the payment of the outstanding
principal amount of the Certificates prior to the Final Legal Distribution Date.
See "Description of the Certificates".
The reduction, suspension or withdrawal of the ratings of the Certificates
will not, by itself, constitute an Event of Default.
NO PROTECTION AGAINST HIGHLY LEVERAGED OR EXTRAORDINARY TRANSACTIONS
The Certificates, the Equipment Notes and the underlying agreements will
not contain any financial or other covenants or "event risk" provisions
protecting the Certificateholders in the event of a highly leveraged or other
extraordinary transaction affecting American or its affiliates. See "The
Company".
LIMITED ABILITY TO RESELL THE CERTIFICATES
Prior to this offering, there has been no public market for the
Certificates. Neither American nor any Trust intends to apply for listing of the
Certificates on any securities exchange or otherwise. The Underwriters may
assist in resales of the Certificates, but they are not required to do so. A
secondary market for the Certificates may not develop. If a secondary market
does develop, it might not continue or it might not be sufficiently liquid to
allow you to resell any of your Certificates. If an active public market does
not develop, the market price and liquidity of the Certificates may be adversely
affected.
S-17
<PAGE> 18
THE COMPANY
American, the principal subsidiary of AMR Corporation ("AMR"), was founded
in 1934. American is one of the largest scheduled passenger airlines in the
world. At the end of 1998, American provided scheduled jet service to more than
180 destinations throughout North America, the Caribbean, Latin America, Europe
and the Pacific. American is also one of the largest scheduled air freight
carriers in the world, providing a full range of freight and mail services to
shippers throughout its system. The postal address for American's principal
executive offices is P.O. Box 619616, Dallas/Fort Worth Airport, Texas
75261-9616 (Telephone: 817-963-1234).
AMR has indicated that it is considering a potential spin-off transaction
in which AMR would distribute to its shareholders all of its ownership interest
in Sabre Holdings Corporation ("Sabre"). Sabre is a majority-owned subsidiary of
AMR. Through its wholly-owned subsidiary, Sabre, Inc., Sabre provides electronic
travel distribution services through its Sabre(R) computer reservations system,
and provides information technology services to the travel and transportation
industry. Sabre also operates and maintains substantially all of the computer
systems and applications utilized by American. In the event of a spin-off of
Sabre, the earnings and assets of Sabre would no longer be available to AMR. The
impact, if any, that an AMR spin-off of Sabre would have on American's credit
ratings, including those applicable to the Certificates, is uncertain,
notwithstanding the fact that AMR has no obligations with respect to the
Equipment Notes and the Certificates.
USE OF PROCEEDS
The proceeds from the sale of the Certificates of each Trust will be used
to purchase the Equipment Notes to be held by such Trust. American will issue
the Equipment Notes to finance its acquisition of various aircraft delivered or
to be delivered to American in 1999.
DESCRIPTION OF THE CERTIFICATES
The following summary of particular terms of the Certificates supplements
(and, to the extent inconsistent therewith, replaces) the description of the
general terms and provisions of the Certificates set forth in the Prospectus
accompanying this Prospectus Supplement (the "Prospectus"). The summary does not
purport to be complete and is qualified in its entirety by reference to all of
the provisions of the Basic Agreement, the Certificates, the Trust Supplements,
the Liquidity Facilities and the Intercreditor Agreement, each of which will be
filed as an exhibit to a Current Report on Form 8-K to be filed by American with
the Securities and Exchange Commission (the "Commission").
Except as otherwise indicated, the following summary relates to each of the
Trusts and the Certificates issued by each Trust. The terms and conditions
governing each of the Trusts will be substantially the same, except as described
under "-- Subordination" below and except that the principal amount and
scheduled principal repayments of the Equipment Notes held by each Trust and the
interest rate and maturity date of the Equipment Notes held by each Trust will
differ. The references to Sections in parentheses in the following summary are
to the relevant Sections of the Basic Agreement unless otherwise indicated.
GENERAL
Each Pass Through Certificate (collectively, the "Certificates") will
represent a fractional undivided interest in one of the four American Airlines
1999-1 Pass Through Trusts: the "Class A-1 Trust", the "Class A-2 Trust", the
"Class B Trust" and the "Class C Trust", and, collectively, the "Trusts". The
Trusts will be formed pursuant to a pass through trust agreement between
American and State Street Bank and Trust Company of Connecticut, National
Association, as trustee, dated as of , 1999 (the "Basic Agreement"),
and four separate supplements thereto (each, a "Trust Supplement" and, together
with the Basic Agreement, collectively, the "Pass Through Trust Agreements").
The trustee under the Class A-1 Trust, the Class A-2 Trust, the Class B Trust
and the Class C Trust is referred to
S-18
<PAGE> 19
herein respectively as the "Class A-1 Trustee", the "Class A-2 Trustee", the
"Class B Trustee" and the "Class C Trustee", and collectively as the "Trustees".
The Certificates to be issued by the Class A-1 Trust, the Class A-2 Trust, the
Class B Trust and the Class C Trust are referred to herein respectively as the
"Class A-1 Certificates", the "Class A-2 Certificates", the "Class B
Certificates" and the "Class C Certificates". The Class A-1 Trust will purchase
all the Series A-1 Equipment Notes, the Class A-2 Trust will purchase all the
Series A-2 Equipment Notes, the Class B Trust will purchase all the Series B
Equipment Notes, and the Class C Trust will purchase all the Series C Equipment
Notes. The holders of the Class A-1 Certificates, the Class A-2 Certificates,
the Class B Certificates and the Class C Certificates are referred to herein
respectively as the "Class A-1 Certificateholders", the "Class A-2
Certificateholders", the "Class B Certificateholders" and the "Class C
Certificateholders", and collectively as the "Certificateholders". The initial
principal balance of the Equipment Notes held by each Trust will equal the
initial aggregate face amount of the Certificates issued by such Trust.
Each Certificate will represent a fractional undivided interest in the
Trust created by the Basic Agreement and the applicable Trust Supplement
pursuant to which such Certificate is issued. (Section 2.01) The property of
each Trust (the "Trust Property") will consist of:
- subject to the Intercreditor Agreement, the Equipment Notes acquired by
such Trust, all monies at any time paid thereon and all monies due and to
become due thereunder;
- the rights of such Trust under the Intercreditor Agreement (including all
rights to receive monies and other property payable thereunder);
- all monies receivable under the Liquidity Facility for such Trust; and
- funds from time to time deposited with the Trustee in accounts relating
to such Trust.
The Certificates represent interests in the respective Trusts only, and all
payments and distributions thereon will be made only from the Trust Property of
the related Trust. (Section 3.09) The Certificates do not represent indebtedness
of the Trusts, and references in this Prospectus Supplement to interest accruing
on the Certificates are included for purposes of computation only. The
Certificates do not represent an interest in or obligation of American, the
Trustees, the Subordination Agent, any of the Loan Trustees or any affiliate of
any thereof. Each Certificateholder by its acceptance of a Certificate agrees to
look solely to the income and proceeds from the Trust Property of the related
Trust for payments and distributions on such Certificate.
The Certificates of each Trust will be issued in fully registered form only
and will be subject to the provisions described below under "-- Book-Entry
Registration; Delivery and Form". Certificates will be issued only in minimum
denominations of $1,000 or integral multiples thereof, except that one
Certificate of each Trust may be issued in a different denomination. (Section
3.01)
DISTRIBUTION OF PAYMENTS ON EQUIPMENT NOTES
The following description of distributions on the Certificates should be
read in conjunction with the description of the Intercreditor Agreement because
the Intercreditor Agreement may alter the following provisions in a default
situation. See "-- Subordination" and "Description of the Intercreditor
Agreement".
Payments of principal, Make-Whole Amount (if any) and interest on the
Equipment Notes or with respect to other Trust Property held in each Trust will
be distributed by the Trustee to Certificateholders of such Trust on the date
receipt of such payment is confirmed, except in the case of certain types of
Special Payments.
The Equipment Notes held in each Trust will accrue interest at the
applicable rate per annum for Certificates to be issued by such Trust set forth
on the cover page of this Prospectus Supplement, payable on April 15 and October
15 of each year, commencing on April 15, 2000. Such interest payments will be
distributed to Certificateholders of such Trust on each such date until the
final Distribution Date for such
S-19
<PAGE> 20
Trust, subject to the Intercreditor Agreement. Interest will be calculated on
the basis of a 360-day year consisting of twelve 30-day months.
Distributions of interest applicable to the Certificates to be issued by
each of the Trusts will be supported by a separate Liquidity Facility to be
provided by the Liquidity Provider for the benefit of the holders of such
Certificates in an aggregate amount sufficient to distribute interest on the
Pool Balance thereof at the Stated Interest Rate for such Trust on up to three
successive Regular Distribution Dates (without regard to any future
distributions of principal on such Certificates). The Liquidity Facility for any
Class of Certificates does not provide for drawings thereunder to pay for
principal of or Make-Whole Amount on the Certificates of such Class, any
interest with respect to the Certificates of such Class in excess of the Stated
Interest Rate, or, notwithstanding the subordination provisions of the
Intercreditor Agreement, principal of or interest or Make-Whole Amount with
respect to the Certificates of any other Class. Therefore, only the holders of
the Certificates to be issued by a particular Trust will be entitled to receive
and retain the proceeds of drawings under the Liquidity Facility for such Trust.
See "Description of the Liquidity Facilities".
Payments of principal of the Series A-1 Equipment Notes are scheduled to be
received by the Trustee in installments on April 15 and October 15 in certain
years, commencing on April 15, 2000 and ending on April 15, 2009. The entire
principal amount of the Series A-2 Equipment Notes is scheduled for payment on
October 15, 2009; the entire principal amount of the Series B Equipment Notes is
scheduled for payment on October 15, 2009; and the entire principal amount of
the Series C Equipment Notes is scheduled for payment on October 15, 2004.
Scheduled payments of interest or principal on the Equipment Notes are
referred to herein as "Scheduled Payments," and April 15 and October 15 of each
year are referred to herein as "Regular Distribution Dates" (each Regular
Distribution Date and Special Distribution Date, a "Distribution Date"). See
"Description of the Equipment Notes -- Principal and Interest Payments". The
"Final Legal Distribution Date" for the Class A-1 Certificates is October 15,
2010, for the Class A-2 Certificates is April 15, 2011, for the Class B
Certificates is April 15, 2011 and for the Class C Certificates is April 15,
2006.
Subject to the Intercreditor Agreement, on each Regular Distribution Date
the Trustee of each Trust will distribute to the Certificateholders of such
Trust all Scheduled Payments received in respect of Equipment Notes held on
behalf of such Trust, the receipt of which is confirmed by the Trustee on such
Regular Distribution Date. Each Certificateholder of each Trust will be entitled
to receive, subject to the Intercreditor Agreement, its proportionate share,
based upon its fractional interest in such Trust, of any distribution in respect
of Scheduled Payments of principal or interest on Equipment Notes held on behalf
of such Trust. Each such distribution of Scheduled Payments will be made by the
applicable Trustee to the Certificateholders of record of the relevant Trust on
the record date applicable to such Scheduled Payment (generally, 15 days prior
to each Regular Distribution Date) subject to certain exceptions. (Section
4.02(a)) If a Scheduled Payment is not received by the applicable Trustee on a
Regular Distribution Date but is received within five days thereafter, it will
be distributed on the date received to such holders of record. If it is received
after such five-day period, it will be treated as a Special Payment and
distributed as described below.
Any payment in respect of, or any proceeds of, any Equipment Note or the
Collateral under (and as defined in) any Indenture other than a Scheduled
Payment (each, a "Special Payment") will be distributed on, in the case of an
early redemption of any Equipment Note, the date of such early redemption (which
shall be a Business Day), and otherwise on the Business Day specified for
distribution of such Special Payment pursuant to a notice delivered by each
Trustee as soon as practicable after the Trustee has received funds for such
Special Payment (each a "Special Distribution Date"). Any such distribution will
be subject to the Intercreditor Agreement.
Each Trustee will mail a notice to the Certificateholders of the applicable
Trust stating the scheduled Special Distribution Date, the related record date,
the amount of the Special Payment and the reason for the Special Payment. In the
case of a redemption of the Equipment Notes held in the related Trust, such
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<PAGE> 21
notice will be mailed not less than 15 days prior to the date such Special
Payment is scheduled to be distributed, and in the case of any other Special
Payment, such notice will be mailed as soon as practicable after the Trustee has
confirmed that it has received funds for such Special Payment. (Section 4.02(c))
Each distribution of a Special Payment, other than a Final Distribution, on a
Special Distribution Date for any Trust will be made by the Trustee to the
Certificateholders of record of such Trust on the record date applicable to such
Special Payment. (Section 4.02(b)) See "-- Indenture Events of Default and
Certain Rights upon an Indenture Event of Default" and "Description of the
Equipment Notes -- Redemption".
Each Pass Through Trust Agreement requires that the Trustee establish and
maintain, for the related Trust and for the benefit of the Certificateholders of
such Trust, one or more non-interest bearing accounts (the "Certificate
Account") for the deposit of payments representing Scheduled Payments received
by such Trustee. Each Pass Through Trust Agreement requires that the Trustee
establish and maintain, for the related Trust and for the benefit of the
Certificateholders of such Trust, one or more accounts (the "Special Payments
Account") for the deposit of payments representing Special Payments received by
such Trustee, which will be non-interest bearing except in certain circumstances
where the Trustee may invest amounts in such account in certain Permitted
Investments. Pursuant to the terms of each Pass Through Trust Agreement, the
Trustee is required to deposit any Scheduled Payments relating to the applicable
Trust received by it in the Certificate Account of such Trust and to deposit any
Special Payments so received by it in the Special Payments Account of such
Trust. (Section 4.01) All amounts so deposited will be distributed by the
Trustee on a Regular Distribution Date or a Special Distribution Date, as
appropriate. (Section 4.02)
The Final Distribution for each Trust will be made only upon presentation
and surrender of the Certificates for such Trust at the office or agency of the
Trustee specified in the notice given by the Trustee of such Final Distribution.
See "-- Termination of the Trusts" below. Distributions in respect of
Certificates issued in global form will be made as described in "-- Book-Entry
Registration; Delivery and Form" below.
If any Distribution Date is a Saturday, a Sunday or other day on which
commercial banks are authorized or required to close in New York, New York,
Dallas, Texas, or the city and state in which the Trustee or any Loan Trustee is
located (any other day being a "Business Day"), distributions scheduled to be
made on such Regular Distribution Date or Special Distribution Date may be made
on the next succeeding Business Day without additional interest.
SUBORDINATION
The Certificates are subject to subordination terms set forth in the
Intercreditor Agreement which vary depending upon whether a Triggering Event has
occurred. See "Description of the Intercreditor Agreement -- Priority of
Distributions".
POOL FACTORS
The "Pool Balance" of the Certificates issued by any Trust indicates, as of
any date, the original aggregate face amount of the Certificates of such Trust
less the aggregate amount of all distributions made in respect of the
Certificates of such Trust other than distributions made in respect of interest
or Make-Whole Amount or reimbursement of any costs and expenses incurred in
connection therewith. The Pool Balance of the Certificates issued by any Trust
as of any Distribution Date will be computed after giving effect to any payment
of principal on the Equipment Notes or other Trust Property held in such Trust
and the distribution thereof to be made on that date. (Section 1.01)
The "Pool Factor" for each Trust as of any date is the quotient (rounded to
the seventh decimal place) computed by dividing (i) the Pool Balance as of such
date by (ii) the original aggregate face amount of the Certificates of such
Trust. The Pool Factor for each Trust as of any Distribution Date will be
computed after giving effect to any payment of principal on the Equipment Notes
or other Trust Property held in such Trust and the distribution thereof to be
made on that date. (Section 1.01) The Pool
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<PAGE> 22
Factor for each Trust will be 1.0000000 on the date of issuance of the
Certificates; thereafter, the Pool Factor for each Trust will decline as
described herein to reflect reductions in the Pool Balance of such Trust. The
amount of a Certificateholder's pro rata share of the Pool Balance of a Trust
can be determined by multiplying the original denomination of the
Certificateholder's Certificate of such Trust by the Pool Factor for such Trust
as of the applicable Distribution Date. Notice of the Pool Factor and the Pool
Balance for each Trust will be mailed to Certificateholders of such Trust on
each Distribution Date. (Section 4.03)
The following table sets forth the aggregate principal amortization
schedule for the Equipment Notes held in each Trust and resulting Pool Factors
with respect to such Trust. The actual aggregate principal amortization schedule
applicable to a Trust and the resulting Pool Factors with respect to such Trust
may differ from those set forth below because the scheduled distribution of
principal payments for any Trust would be affected if any Equipment Notes held
in such Trust are redeemed or if a default in payment of the principal of such
Equipment Notes occurred.
<TABLE>
<CAPTION>
CLASS A-1 TRUST CLASS A-2 TRUST CLASS B TRUST
-------------------------- --------------------------- --------------------------
SCHEDULED EXPECTED SCHEDULED EXPECTED SCHEDULED EXPECTED
PRINCIPAL POOL PRINCIPAL POOL PRINCIPAL POOL
DATE PAYMENTS FACTOR PAYMENTS FACTOR PAYMENTS FACTOR
- ---- -------------- --------- --------------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
April 15, 2000....... $ 9,709,596.65 0.9356507 $ 0.00 1.0000000 $ 0.00 1.0000000
October 15, 2000..... 23,673,769.33 0.7787555 0.00 1.0000000 0.00 1.0000000
April 15, 2001....... 9,709,596.65 0.7144062 0.00 1.0000000 0.00 1.0000000
October 15, 2001..... 3,764,916.00 0.6894546 0.00 1.0000000 0.00 1.0000000
April 15, 2002....... 9,709,596.65 0.6251054 0.00 1.0000000 0.00 1.0000000
October 15, 2002..... 3,764,916.00 0.6001538 0.00 1.0000000 0.00 1.0000000
April 15, 2003....... 9,709,596.65 0.5358045 0.00 1.0000000 0.00 1.0000000
October 15, 2003..... 3,764,916.00 0.5108530 0.00 1.0000000 0.00 1.0000000
April 15, 2004....... 9,709,596.65 0.4465037 0.00 1.0000000 0.00 1.0000000
October 15, 2004..... 3,764,916.00 0.4215522 0.00 1.0000000 0.00 1.0000000
April 15, 2005....... 9,709,596.65 0.3572029 0.00 1.0000000 0.00 1.0000000
October 15, 2005..... 3,764,916.00 0.3322513 0.00 1.0000000 0.00 1.0000000
April 15, 2006....... 9,709,596.65 0.2679021 0.00 1.0000000 0.00 1.0000000
October 15, 2006..... 3,764,916.00 0.2429505 0.00 1.0000000 0.00 1.0000000
April 15, 2007....... 9,709,596.65 0.1786012 0.00 1.0000000 0.00 1.0000000
October 15, 2007..... 3,764,916.00 0.1536497 0.00 1.0000000 0.00 1.0000000
April 15, 2008....... 9,709,596.65 0.0893004 0.00 1.0000000 0.00 1.0000000
October 15, 2008..... 3,764,916.00 0.0643488 0.00 1.0000000 0.00 1.0000000
April 15, 2009....... 9,709,532.82 0.0000000 0.00 1.0000000 0.00 1.0000000
October 15, 2009..... 0.00 0.0000000 316,969,000.00 0.0000000 84,525,000.00 0.0000000
<CAPTION>
CLASS C TRUST
--------------------------
SCHEDULED EXPECTED
PRINCIPAL POOL
DATE PAYMENTS FACTOR
- ---- -------------- ---------
<S> <C> <C>
April 15, 2000....... $ 0.00 1.0000000
October 15, 2000..... 0.00 1.0000000
April 15, 2001....... 0.00 1.0000000
October 15, 2001..... 0.00 1.0000000
April 15, 2002....... 0.00 1.0000000
October 15, 2002..... 0.00 1.0000000
April 15, 2003....... 0.00 1.0000000
October 15, 2003..... 0.00 1.0000000
April 15, 2004....... 0.00 1.0000000
October 15, 2004..... 47,617,000.00 0.0000000
April 15, 2005....... 0.00 0.0000000
October 15, 2005..... 0.00 0.0000000
April 15, 2006....... 0.00 0.0000000
October 15, 2006..... 0.00 0.0000000
April 15, 2007....... 0.00 0.0000000
October 15, 2007..... 0.00 0.0000000
April 15, 2008....... 0.00 0.0000000
October 15, 2008..... 0.00 0.0000000
April 15, 2009....... 0.00 0.0000000
October 15, 2009..... 0.00 0.0000000
</TABLE>
The Pool Factor and Pool Balance of each Trust will be recomputed if there
has been an early redemption or default in the payment of principal or interest
in respect of one or more of the Equipment Notes held in a Trust, as described
in "-- Indenture Events of Default and Certain Rights upon an Indenture Event of
Default" and "Description of the Equipment Notes -- Redemption". Notice of the
Pool Factors and Pool Balances of each Trust as so recomputed after giving
effect to any Special Payment to Certificateholders resulting from such an early
redemption or default in respect of one more Equipment Notes will be mailed to
Certificateholders of Certificates of the related Trust with such Special
Payment, as described in "-- Reports to Certificateholders".
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<PAGE> 23
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the applicable Trustee will include with each
distribution of a Scheduled Payment or Special Payment to Certificateholders of
the related Trust a statement, giving effect to such distribution to be made on
such Distribution Date, setting forth the following information (per $1,000
aggregate principal amount of Certificate as to items (1) and (2) below):
(1) the amount of such distribution allocable to principal and the
amount allocable to Make-Whole Amount, if any;
(2) the amount of such distribution allocable to interest; and
(3) the Pool Balance and the Pool Factor for such Trust. (Section
4.03)
As long as the Certificates are registered in the name of Cede, as nominee
for DTC, on the record date prior to each Distribution Date, the applicable
Trustee will request from DTC a securities position listing setting forth the
names of all DTC Participants reflected on DTC's books as holding interests in
the Certificates on such record date. On each Distribution Date, the applicable
Trustee will mail to each such DTC Participant the statement described above and
will make available additional copies as requested by such DTC Participant for
forwarding to Certificate Owners. (Section 4.03(a))
In addition, after the end of each calendar year, the applicable Trustee
will prepare for each Certificateholder of each Trust at any time during the
preceding calendar year a report containing the sum of the amounts determined
pursuant to clauses (1) and (2) above with respect to the Trust for such
calendar year or, if such person was a Certificateholder during only a portion
of such calendar year, for the applicable portion of such calendar year, and
such other items as are readily available to such Trustee and which a
Certificateholder reasonably requests as necessary for the purpose of such
Certificateholder's preparation of its U.S. federal income tax returns. Such
report and such other items will be prepared on the basis of information
supplied to the applicable Trustee by the DTC Participants and will be delivered
by such Trustee to such DTC Participants to be available for forwarding by such
DTC Participants to Certificate Owners. (Section 4.03(b))
At such time, if any, as the Certificates are issued in the form of
definitive certificates, the applicable Trustee will prepare and deliver the
information described above to each Certificateholder of record of each Trust as
the name and period of record ownership of such Certificateholder appears on the
records of the registrar of the Certificates.
INDENTURE EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN INDENTURE EVENT OF
DEFAULT
Because the Equipment Notes issued under an Indenture will be held in more
than one Trust, a continuing Indenture Event of Default under such Indenture
would affect the Equipment Notes held by each such Trust. For a description of
the Indenture Events of Default under each Indenture, see "Description of the
Equipment Notes -- Indenture Events of Default, Notice and Waiver". There are no
cross-default or cross-acceleration provisions in the Indentures. Consequently,
events resulting in an Indenture Event of Default under any particular Indenture
may or may not result in an Indenture Event of Default under any other
Indenture. If an Indenture Event of Default occurs in fewer than all of the
Indentures related to a Trust, notwithstanding the treatment of Equipment Notes
issued under those Indentures under which an Indenture Event of Default has
occurred, payments of principal and interest on those Equipment Notes issued
pursuant to Indentures with respect to which an Indenture Event of Default has
not occurred will continue to be made as originally scheduled and distributed to
the holders of the Certificates, subject to the Intercreditor Agreement. See
"Description of the Intercreditor Agreement -- Priority of Distributions".
If the same institution acts as Trustee of multiple Trusts, in the absence
of instructions from the Certificateholders of any such Trust, such Trustee
could be faced with a potential conflict of interest upon an Indenture Event of
Default. In such event, each Trustee has indicated that it would resign as
Trustee of some or all such Trusts, and a successor trustee would be appointed
in accordance with the terms of the
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<PAGE> 24
applicable Pass Through Trust Agreement. State Street Bank and Trust Company of
Connecticut, National Association, will be the initial Trustee under each Trust.
Upon the occurrence and continuation of an Indenture Event of Default under
any Indenture, the Controlling Party will direct the Loan Trustee under such
Indenture in the exercise of remedies and may accelerate the Equipment Notes
issued under such Indenture and sell all (but not less than all) of such
Equipment Notes or the related Aircraft to any person, subject to certain
limitations. See "Description of the Intercreditor Agreement -- Intercreditor
Rights -- Sale of Equipment Notes or Aircraft". The proceeds of such sale will
be distributed pursuant to the provisions of the Intercreditor Agreement. Any
proceeds so distributed to any Trustee upon any such sale will be deposited in
the applicable Special Payments Account and will be distributed to the
Certificateholders of the applicable Trust on a Special Distribution Date.
(Sections 4.01 and 4.02) The market for Equipment Notes at the time of the
existence of an Indenture Event of Default may be very limited, and there can be
no assurance as to the price at which they could be sold. If a Loan Trustee
sells any such Equipment Notes for less than their outstanding principal amount,
certain Certificateholders will receive a smaller amount of principal
distributions than anticipated and will not have any claim for the shortfall
against American, any Liquidity Provider or any Trustee. Neither such Trustee
nor the Certificateholders of such Trust, furthermore, could take action with
respect to any remaining Equipment Notes held in such Trust as long as no
Indenture Events of Default existed with respect thereto.
Any amount, other than Scheduled Payments received on a Regular
Distribution Date or within five days thereafter, distributed to the Trustee of
any Trust by the Subordination Agent on account of the Equipment Notes or other
Trust Property held in such Trust following an Indenture Event of Default under
any Indenture will be deposited in the Special Payments Account for such Trust
and will be distributed to the Certificateholders of such Trust on a Special
Distribution Date. (Sections 4.01 and 4.02)
Any funds representing payments received with respect to any defaulted
Equipment Notes held in a Trust, or the proceeds from the sale of any Equipment
Notes, held by the Trustee in the Special Payments Account for such Trust will,
to the extent practicable, be invested and reinvested by such Trustee in certain
Permitted Investments pending the distribution of such funds on a Special
Distribution Date. (Section 4.04) "Permitted Investments" are defined as
obligations of the United States or agencies or instrumentalities thereof the
payment of which is backed by the full faith and credit of the United States and
which mature in not more than 60 days or such lesser time as is required for the
distribution of any such funds on a Special Distribution Date. (Section 1.01)
Each Pass Through Trust Agreement provides that the Trustee of the related
Trust will, within 90 days after the occurrence of a default (as defined below)
known to it, give to the Certificateholders of such Trust notice, transmitted by
mail, of such default, unless such default shall have been cured or waived;
provided that, (i) in the case of defaults not relating to the payment of money,
the Trustee shall not give such notice until the earlier of the time at which
such default becomes an "event of default" and the expiration of 60 days from
the occurrence of such default and (ii) except in the case of default in a
payment of principal, Make-Whole Amount, if any, or interest on any of the
Equipment Notes held in such Trust, the applicable Trustee will be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the interests of such Certificateholders. (Section 7.02) The
term "default" with respect to a Trust, for the purpose of the provision
described in this paragraph only, means an event that is, or after notice or
lapse of time or both would become, an event of default or a Triggering Event
with respect to such Trust. The term "event of default" with respect to a Trust
means an Indenture Event of Default under any Indenture pursuant to which
Equipment Notes held by such Trust were issued.
Subject to certain qualifications set forth in each Pass Through Trust
Agreement and to the Intercreditor Agreement, the Certificateholders of each
Trust holding Certificates evidencing fractional undivided interests aggregating
not less than a majority in interest in such Trust will have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee with respect to such Trust or pursuant to the terms of the
Intercreditor Agreement, or exercising any trust
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<PAGE> 25
or power conferred on such Trustee under such Pass Through Trust Agreement or
the Intercreditor Agreement, including any right of such Trustee as Controlling
Party under the Intercreditor Agreement or as holder of the Equipment Notes (the
"Note Holder"). (Section 6.04)
Subject to the Intercreditor Agreement, the holders of the Certificates of
a Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of such Trust may on behalf of the holders of all the
Certificates of such Trust waive any past "default" or "event of default" under
the related Pass Through Trust Agreement and its consequences or, if the Trustee
of such Trust is the Controlling Party, may direct the Trustee to instruct the
applicable Loan Trustee to waive any past Indenture Event of Default and its
consequences; provided, however, the consent of each holder of a Certificate of
a Trust is required to waive (i) a default in the deposit of any Scheduled
Payment or Special Payment or in the distribution thereof, (ii) a default in
payment of the principal, Make-Whole Amount, if any, or interest with respect to
any of the Equipment Notes held in such Trust and (iii) a default in respect of
any covenant or provision of the related Pass Through Trust Agreement that
cannot be modified or amended without the consent of each Certificateholder of
such Trust affected thereby. (Section 6.05) Each Indenture will provide that,
with certain exceptions, the holders of the majority in aggregate unpaid
principal amount of the Equipment Notes issued thereunder may on behalf of all
such Note Holders waive any past default or Indenture Event of Default
thereunder. Notwithstanding the foregoing provisions of this paragraph, however,
pursuant to the Intercreditor Agreement only the Controlling Party will be
entitled to waive any such past default or Indenture Event of Default.
PURCHASE RIGHTS OF CERTIFICATEHOLDERS
After the occurrence and during the continuation of a Triggering Event,
with ten days' prior written notice to the Trustee and each Certificateholder of
the same Class:
- if either the Class A-1 or Class A-2 Certificateholders are then
represented by the Controlling Party, the Certificateholders of such
Class that is not so represented will have the right to purchase all, but
not less than all, of the Certificates of such Class that is so
represented;
- the Class B Certificateholders will have the right to purchase all, but
not less than all, of the Class A-1 and Class A-2 Certificates;
- the Class C Certificateholders will have the right to purchase all, but
not less than all, of the Class A-1, Class A-2 and Class B Certificates;
and
- if the Class D Certificates are issued, the Class D Certificateholders
will have the right to purchase all, but not less than all, of the Class
A-1, Class A-2, Class B and Class C Certificates.
In each case the purchase price for a Class of Certificates will be equal
to the Pool Balance of such Class plus accrued and undistributed interest
thereon to the date of purchase, without Make-Whole Amount but including any
other amounts then due and payable to the Certificateholders of such Class. Such
purchase right may be exercised by any Certificateholder of the Class or Classes
entitled to such right. In each case, if prior to the end of the ten-day notice
period, any other Certificateholder of the same Class notifies the purchasing
Certificateholder that the other Certificateholder wants to participate in such
purchase, then such other Certificateholder may join with the purchasing
Certificateholder to purchase the Certificates pro rata based on the interest in
the Trust held by each Certificateholder. (Trust Supplements, Section 4.01)
PTC EVENT OF DEFAULT
A "PTC Event of Default" with respect to any Class of Certificates means
the failure to distribute within ten Business Days after the applicable
Distribution Date either:
- the outstanding Pool Balance of such Class of Certificates on the Final
Legal Distribution Date for such Class; or
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<PAGE> 26
- interest scheduled for distribution on such Class of Certificates on any
Distribution Date (unless the Subordination Agent has made an Interest
Drawing, or a withdrawal from the Cash Collateral Account for such Class
of Certificates, in an amount sufficient to pay such interest and has
distributed such amount to the Trustee entitled thereto).
Any failure to make expected principal distributions with respect to any
Class of Certificates on any Regular Distribution Date (other than the Final
Legal Distribution Date) will not constitute a PTC Event of Default with respect
to such Certificates.
A PTC Event of Default with respect to the most senior outstanding Class of
Certificates resulting from an Indenture Event of Default under all Indentures
will constitute a Triggering Event. For a discussion of the consequences of the
occurrence of a Triggering Event, see "Description of the Intercreditor
Agreement -- Priority of Distributions".
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
American will be prohibited from consolidating with or merging into any
other corporation or transferring substantially all of its assets as an entirety
to any other corporation unless:
- the surviving successor or transferee corporation is validly existing
under the laws of the United States or any state thereof or the District
of Columbia;
- the surviving successor or transferee corporation shall, if and to the
extent required under Section 1110 of the United States Bankruptcy Code
(the "Bankruptcy Code") in order that the Loan Trustee shall continue to
be entitled to any benefits of Section 1110 with respect to an Aircraft,
be a "citizen of the United States" (as defined in Title 49 of the United
States Code relating to aviation (the "Transportation Code")) holding an
air carrier operating certificate issued by the Secretary of
Transportation pursuant to Chapter 447 of the Transportation Code;
- the surviving successor or transferee corporation expressly assumes all
of the obligations of American contained in the Basic Agreement and any
Trust Supplement, the Indentures and the Participation Agreements; and
- American has delivered a certificate and an opinion or opinions of
counsel indicating that such transaction, in effect, complies with such
conditions.
In addition, after giving effect to such transaction, no Indenture Event of
Default shall have occurred and be continuing. (Section 5.02; Participation
Agreements, Section 6.02)
MODIFICATION OF THE PASS THROUGH TRUST AGREEMENTS AND CERTAIN OTHER AGREEMENTS
Each Pass Through Trust Agreement contains provisions permitting American
and the Trustee to enter into a supplement to such Pass Through Trust Agreement
or, if applicable, to the Intercreditor Agreement, the Participation Agreements
or any Liquidity Facility, without the consent of the holders of any of the
Certificates of such Trust to, among other things:
- evidence the succession of another corporation or entity to American and
the assumption by such corporation or entity of American's obligations
under such Pass Through Trust Agreement, the Participation Agreements or
any Liquidity Facility;
- add to the covenants of American for the benefit of holders of such
Certificates or surrender any right or power conferred upon American in
such Pass Through Trust Agreement, the Intercreditor Agreement, the
Participation Agreements or any Liquidity Facility;
- cure any ambiguity or correct any mistake or inconsistency contained in
such Pass Through Trust Agreement, the Intercreditor Agreement or any
Liquidity Facility;
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<PAGE> 27
- make or modify any other provision with respect to matters or questions
arising under such Pass Through Trust Agreement, the Intercreditor
Agreement or any Liquidity Facility as American may deem necessary or
desirable and that will not materially adversely affect the interests of
the holders of such Certificates;
- comply with any requirement of the Commission, any applicable law, rules
or regulations of any exchange or quotation system on which the
Certificates are listed or of any regulatory body;
- modify, eliminate or add to the provisions of such Pass Through Trust
Agreement, the Intercreditor Agreement or any Liquidity Facility to the
extent necessary to continue the qualification of such Pass Through Trust
Agreement (including any supplemental agreement) or any such agreement or
Liquidity Facility under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act") and add to such Pass Through Trust Agreement, the
Intercreditor Agreement or any Liquidity Facility such other provisions
as may be expressly permitted by the Trust Indenture Act;
- provide for a successor Trustee under such Pass Through Trust Agreement
and add to or change any of the provisions of such Pass Through Trust
Agreement, the Intercreditor Agreement or any Liquidity Facility as
necessary to facilitate the administration of the Trusts under such Pass
Through Trust Agreement by more than one Trustee or, as provided in the
Intercreditor Agreement, to provide for multiple Liquidity Facilities for
such Trust;
- provide certain information to the Trustee as required in such Pass
Through Trust Agreement;
- add to or change the Basic Agreement and any Trust Supplement to
facilitate the issuance of any Certificates in bearer form or to
facilitate or provide for the issuance of any Certificates in global form
in addition to or in place of Certificates in certificated form;
- provide for the delivery of Certificates or any supplement to such Pass
Through Trust Agreement in or by means of any computerized, electronic or
other medium, including computer diskette;
- correct or supplement the description of any property of any Trust; and
- modify, eliminate or add to the provisions of such Pass Through Trust
Agreement to reflect the substitution of a substitute aircraft for any
Aircraft;
provided, however, that no such supplement shall cause any Trust to become an
association taxable as a corporation for U.S. federal income tax purposes.
(Section 9.01)
Each Pass Through Trust Agreement also contains provisions permitting
American and the Trustee, with the consent of the holders of the Certificates of
the related Trust evidencing fractional undivided interests aggregating not less
than a majority in interest of such Trust, to enter into supplemental agreements
adding any provisions to or changing or eliminating any of the provisions of
such Pass Through Trust Agreement, the Intercreditor Agreement or any Liquidity
Facility or modifying the rights of the Certificateholders of such Trust, except
that no such supplemental agreement may, without the consent of the holder of
each Certificate affected thereby:
- reduce in any manner the amount of, or delay the timing of, any receipt
by the Trustee of payments on the Equipment Notes held in such Trust, or
distributions in respect of any Certificate of such Trust, or change the
date or place of any payment or change the coin or currency in which such
Certificate is payable, or impair the right of any Certificateholder of
such Trust to institute suit for the enforcement of any such payment when
due;
- permit the disposition of any Equipment Note held in such Trust, except
as provided in such Pass Through Trust Agreement, the Intercreditor
Agreement or any Liquidity Facility;
- alter the priority of distributions specified in the Intercreditor
Agreement in a manner materially adverse to such Certificateholders;
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<PAGE> 28
- reduce the percentage of the aggregate fractional undivided interests of
the Trust provided for in such Pass Through Trust Agreement, the consent
of the holders of which is required for any such supplemental agreement
or for any waiver or modification provided for in such Pass Through Trust
Agreement; or
- cause such Trust to become an association taxable as a corporation for
U.S. Federal income tax purposes.
If a Trustee, as holder (or beneficial owner through the Subordination
Agent) of any Equipment Note in trust for the benefit of the Certificateholders
of the relevant Trust or as Controlling Party under the Intercreditor Agreement,
receives (directly or indirectly through the Subordination Agent) a request for
a consent to any amendment, modification, waiver or supplement under any
Indenture, any Participation Agreement, any Equipment Note or any other related
document, the Trustee will forthwith send a notice of such proposed amendment,
modification, waiver or supplement to each Certificateholder of the relevant
Trust registered on the register of such Trust as of the date of such notice.
The Trustee will request from the Certificateholders a direction as to:
- whether or not to take or refrain from taking (or direct the
Subordination Agent to take or refrain from taking) any action that a
Note Holder or the Controlling Party has the option to take or direct;
- whether or not to give or execute (or direct the Subordination Agent to
give or execute) any waivers, consents, amendments, modifications or
supplements as a Note Holder or as Controlling Party; and
- how to vote (or direct the Subordination Agent to vote) any Equipment
Note if a vote has been called for with respect thereto.
(Section 10.01; Intercreditor Agreement, Section 8.01(b))
Provided such a request for Certificateholder direction has been made, in
directing any action or casting any vote or giving any consent as the holder of
any Equipment Note (or in directing the Subordination Agent in any of the
foregoing):
- other than as the Controlling Party, the Trustee will vote for or give
consent to any such action with respect to such Equipment Note in the
same proportion as that of (x) the aggregate face amount of all
Certificates actually voted in favor of or for giving consent to such
action by such direction of Certificateholders to (y) the aggregate face
amount of all outstanding Certificates of the relevant Trust; and
- as the Controlling Party, the Trustee will vote as directed in such
Certificateholder direction by the Certificateholders evidencing
fractional undivided interests aggregating not less than a majority in
interest in the relevant Trust.
(Section 10.01)
For purposes of the preceding paragraph, a Certificate is deemed "actually
voted" if the Certificateholder has delivered to the Trustee an instrument
evidencing such Certificateholder's consent to such direction prior to one
Business Day before the Trustee directs such action or casts such vote or gives
such consent. Notwithstanding the foregoing, but subject to certain rights of
the Certificateholders under the relevant Pass Through Trust Agreement and
subject to the Intercreditor Agreement, the Trustee may, in its own discretion
and at its own direction, consent and notify the relevant Loan Trustee of such
consent (or direct the Subordination Agent to consent and notify the relevant
Loan Trustee of such consent) to any amendment, modification, waiver or
supplement under the relevant Indenture, Participation Agreement, Equipment Note
or any other related document, if an Indenture Event of Default under any
Indenture has occurred and is continuing, or if such amendment, modification,
waiver or supplement will not materially adversely affect the interests of the
Certificateholders. (Section 10.01)
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POSSIBLE ISSUANCE OF SERIES D EQUIPMENT NOTES
American may elect to issue Series D Equipment Notes in connection with
some or all of the Aircraft, which would be funded from sources other than this
offering. American may elect to fund the sale of the Series D Equipment Notes
through the sale of Pass Through Certificates (the "Class D Certificates")
issued by a Class D American Airlines 1999-1 Pass Through Trust (the "Class D
Trust"). American will not issue any Series D Equipment Notes at any time prior
to the consummation of this offering. American's ability to issue any Series D
Equipment Notes is contingent upon its obtaining written confirmation from each
Rating Agency that the issuance of such Series D Equipment Notes would not
result in a withdrawal or downgrading of the rating of any Class of
Certificates. If the Class D Certificates are issued, the trustee under the
Class D Trust (the "Class D Trustee") will become a party to the Intercreditor
Agreement, and the Class D Certificates would be subordinated in right of
distribution to the Class A-1, Class A-2, Class B and Class C Certificates. See
"Description of the Intercreditor Agreement". In addition, after the occurrence
and during the continuance of a Triggering Event, the Class D Certificateholders
would have certain rights to purchase the Class A-1, Class A-2, Class B and
Class C Certificates. See "-- Purchase Rights of Certificateholders". If Series
D Equipment Notes are issued to any person or entity other than the Class D
Trust, such Series D Equipment Notes will nevertheless be subject to the
provisions of the Intercreditor Agreement that allow the Controlling Party,
during the continuance of an Indenture Event of Default, to direct the Loan
Trustee in taking action under the applicable Indenture. (Intercreditor
Agreement, Section 8.01(c))
TERMINATION OF THE TRUSTS
The obligations of American and the applicable Trustee with respect to a
Trust will terminate upon the distribution to Certificateholders of such Trust
of all amounts required to be distributed to them pursuant to the applicable
Pass Through Trust Agreement and the disposition of all property held in such
Trust. The applicable Trustee will mail to each Certificateholder of record of
such Trust notice of the termination of such Trust, the amount of the proposed
final payment and the proposed date for the distribution of such final payment
for such Trust. The Final Distribution to any Certificateholder of such Trust
will be made only upon surrender of such Certificateholder's Certificates at the
office or agency of the applicable Trustee specified in such notice of
termination. (Section 11.01)
THE TRUSTEES
The Trustee for each Trust initially will be State Street Bank and Trust
Company of Connecticut, National Association. The Trustee's address is State
Street Bank and Trust Company of Connecticut, National Association, 225 Asylum
Street, Goodwin Square, Hartford, Connecticut 06103, Attention: Corporate Trust
Division.
With certain exceptions, the Trustee makes no representations as to the
validity or sufficiency of the Basic Agreement, the Trust Supplements, the
Certificates, the Equipment Notes, the Indentures, the Intercreditor Agreement,
the Participation Agreements, any Liquidity Facility or other related documents.
(Sections 7.04 and 7.15) The Trustee of any Trust will not be liable to the
Certificateholders of such Trust for any action taken or omitted to be taken by
it in good faith in accordance with the direction of the holders of a majority
in face amount of outstanding Certificates of such Trust. Subject to certain
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under any Pass Through Trust Agreement at the request of any
holders of Certificates issued thereunder unless there has been offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by such Trustee in exercising such rights or
powers. (Section 7.03(e)) Each Pass Through Trust Agreement provides that the
applicable Trustee in its individual or any other capacity may acquire and hold
Certificates issued thereunder and, subject to certain conditions, may otherwise
deal with American with the same rights it would have if it were not the
Trustee. (Section 7.05)
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BOOK-ENTRY REGISTRATION; DELIVERY AND FORM
Upon issuance, each Class of Certificates will be represented by one or
more fully registered global certificates. Each global certificate will be
deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in the name of Cede & Co. ("Cede"), the nominee of DTC. DTC was
created to hold securities for its participants ("DTC Participants") and to
facilitate the clearance and settlement of securities transactions between DTC
Participants through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("Indirect
Participants"). See "Description of the Pass Through Certificates -- Book-Entry
Registration" in the Prospectus for a discussion of the book-entry procedures
applicable to the Certificates and the limited circumstances under which
definitive certificates may be issued for the Certificates.
So long as such book-entry procedures are applicable, no person acquiring
an interest in such Certificates ("Certificate Owner") will be entitled to
receive a certificate representing such person's interest in such Certificates.
Unless and until definitive certificates are issued under the limited
circumstances described in the Prospectus, all references in this Prospectus
Supplement to actions by Certificateholders shall refer to actions taken by DTC
upon instructions from DTC Participants, and all references to distributions,
notices, reports and statements to Certificateholders will refer, as the case
may be, to distributions, notices, reports and statements to DTC or Cede, as the
registered holder of such Certificates, or to DTC Participants for distribution
to Certificate Owners in accordance with DTC procedures.
Neither American nor the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Certificates held by Cede, as nominee for
DTC, or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests or for the performance by DTC, any DTC
Participant or any Indirect Participant of their respective obligations under
the rules, regulations and procedures creating and affecting DTC and its
operations or any other statutory, regulatory, contractual or customary
procedures governing their obligations.
DTC management is aware that some computer applications, systems and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its DTC Participants and other members of the
financial community (the "Industry") that it has developed and is implementing a
program so that its Systems, as the same relate to the timely payment of
distributions (including principal and income payments) to securityholders,
book-entry deliveries and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to: (i)
impress upon them the importance of such services being Year 2000 compliant; and
(ii) determine the extent of their efforts for Year 2000 remediation (and, as
appropriate, testing) of their services. In addition, DTC is in the process of
developing such contingency plans as it deems appropriate.
According to DTC, the information set forth in the foregoing two paragraphs
with respect to DTC has been provided to the Industry for informational purposes
only and is not intended to serve as a representation, warranty, or contract
modification of any kind.
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<PAGE> 31
DESCRIPTION OF THE LIQUIDITY FACILITIES
The following summary describes certain terms of the Liquidity Facilities
and certain provisions of the Intercreditor Agreement relating to the Liquidity
Facilities. The summary supplements (and, to the extent inconsistent therewith,
replaces) the description of the general terms and provisions relating to the
Liquidity Facilities and the Intercreditor Agreement and the description of
credit enhancements set forth in the Prospectus. The summary does not purport to
be complete and is qualified in its entirety by reference to all of the
provisions of the Liquidity Facilities and the Intercreditor Agreement, each of
which will be filed as an exhibit to a Current Report on Form 8-K to be filed by
American with the Commission. The provisions of the Liquidity Facilities are
substantially identical except as otherwise indicated.
GENERAL
The liquidity provider for each Trust (the "Liquidity Provider") will enter
into a separate revolving credit agreement (each, a "Liquidity Facility") with
the Subordination Agent with respect to such Trust. Under each Liquidity
Facility, the Liquidity Provider will, if necessary, make one or more advances
("Interest Drawings") to the Subordination Agent in an aggregate amount (the
"Required Amount") sufficient to pay interest on the Pool Balance of the related
Certificates on up to three consecutive semiannual Regular Distribution Dates at
the respective interest rates shown on the cover page of this Prospectus
Supplement for such Certificates (the "Stated Interest Rates"). If interest
payment defaults occur which exceed the amount covered by or available under the
Liquidity Facility for any Trust, the Certificateholders of such Trust will bear
their allocable share of the deficiencies to the extent that there are no other
sources of funds. The initial Liquidity Provider with respect to each Trust may
be replaced by one or more other entities with respect to any of such Trusts
under certain circumstances. Therefore, the Liquidity Provider for the Trusts
may differ.
DRAWINGS
The initial amount available under the Liquidity Facility for each Trust
will be as follows:
<TABLE>
<CAPTION>
AVAILABLE
TRUST AMOUNT
- ----- ---------
<S> <C>
Class A-1................................................ $
Class A-2................................................
Class B..................................................
Class C..................................................
</TABLE>
Except as otherwise provided below, the Liquidity Facility for each Trust
will enable the Subordination Agent to make Interest Drawings thereunder on any
Regular Distribution Date in order to make interest distributions then scheduled
for the Certificates of such Trust at the Stated Interest Rate for such Trust to
the extent that the amount, if any, available to the Subordination Agent on such
Regular Distribution Date is not sufficient to pay such interest. The maximum
amount available to be drawn under a Liquidity Facility with respect to any
Trust on any Regular Distribution Date to fund any shortfall of interest on
Certificates of such Trust will not exceed the then Maximum Available Commitment
under such Liquidity Facility. The "Maximum Available Commitment" at any time
under each Liquidity Facility is an amount equal to the then Required Amount of
such Liquidity Facility less the aggregate amount of each Interest Drawing then
outstanding under such Liquidity Facility at such time, provided that following
a Downgrade Drawing, a Final Drawing or a Non-Extension Drawing under a
Liquidity Facility, the Maximum Available Commitment under such Liquidity
Facility shall be zero.
The Liquidity Facility for any Class of Certificates does not provide for
drawings thereunder to pay for principal of or Make-Whole Amount on the
Certificates of such Class or any interest with respect to the Certificates of
such Class in excess of the Stated Interest Rate for such Class or for more than
three semiannual installments of interest or to pay principal of or interest or
Make-Whole Amount with respect
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<PAGE> 32
to the Certificates of any other Class. (Liquidity Facilities, Section 2.02;
Intercreditor Agreement, Section 3.06)
Each payment by the Liquidity Provider will reduce by the same amount the
Maximum Available Commitment under the related Liquidity Facility, subject to
reinstatement as hereinafter described. With respect to any Interest Drawings,
upon reimbursement of the Liquidity Provider in full or in part for the amount
of such Interest Drawings plus accrued interest thereon, the Maximum Available
Commitment under such Liquidity Facility will be reinstated by the amount
reimbursed but not to exceed the then Required Amount of such Liquidity
Facility; provided, however, such Liquidity Facility will not be so reinstated
at any time if (i) a Liquidity Event of Default has occurred and is continuing
and (ii) less than 65% of the then aggregate outstanding principal amount of all
Equipment Notes are Performing Equipment Notes. With respect to any other
drawings under such Liquidity Facility, amounts available to be drawn thereunder
are not subject to reinstatement. (Liquidity Facilities, Section 2.02(a);
Intercreditor Agreement, Section 3.06(g)) Following each reduction of the Pool
Balance for the applicable Trust, the Required Amount of the Liquidity Facility
for any Trust will be reduced automatically to an amount sufficient to pay
interest on the relevant Pool Balance thereof on the next three successive
semiannual Regular Distribution Dates (without regard to expected future payment
of principal of such Certificates) at the Stated Interest Rate for such Trust.
(Liquidity Facilities, Section 2.04)
"Performing Equipment Note" means an Equipment Note issued pursuant to an
Indenture with respect to which no payment default has occurred and is
continuing (without giving effect to any acceleration); provided that in the
event of a bankruptcy proceeding involving American under the Bankruptcy Code,
(i) any payment default existing during the 60-day period under Section
1110(a)(1)(A) of the Bankruptcy Code (or such longer period as may apply under
Section 1110(b) of the Bankruptcy Code) (the "Section 1110 Period") will not be
taken into consideration, unless during the Section 1110 Period the trustee in
such proceeding or American refuses to assume or agree to perform its
obligations under the Indenture related to such Equipment Note and (ii) any
payment default occurring after the date of the order of relief in such
proceeding will not be taken into consideration if such payment default is cured
under Section 1110(a)(1)(B) of the Bankruptcy Code before the later of 30 days
after the date of such default or the expiration of the Section 1110 Period.
(Intercreditor Agreement, Section 1.01)
REPLACEMENT OF LIQUIDITY FACILITIES
If at any time the short-term unsecured debt rating of the Liquidity
Provider for any Trust issued by either Rating Agency (or if such Liquidity
Provider does not have a short-term unsecured debt rating issued by a given
Rating Agency, the long-term unsecured debt rating of such Liquidity Provider
issued by such Rating Agency) is lower than the Threshold Rating applicable to
such Trust, then the Liquidity Facility for such Class may be replaced by a
Replacement Facility. If such Liquidity Facility is not replaced with a
Replacement Facility within 30 days after the Liquidity Provider receives notice
of the downgrading (or within 45 days after its receipt of such notice solely in
the event of a downgrading of such Liquidity Provider's short-term unsecured
debt rating by Standard & Poor's from A-1+ to A-1), the Subordination Agent will
draw the then Maximum Available Commitment under such Liquidity Facility (the
"Downgrade Drawing"). The Subordination Agent will deposit the proceeds of any
Downgrade Drawing into a cash collateral account (the "Cash Collateral Account")
for such Class of Certificates and will use these proceeds for the same purposes
and under the same circumstances and subject to the same conditions as cash
payments of Interest Drawings under such Liquidity Facility would be used.
(Liquidity Facilities, Section 2.02(c); Intercreditor Agreement, Section
3.06(c))
A "Replacement Facility" for any Liquidity Facility will mean an
irrevocable revolving credit agreement (or agreements) in substantially the form
of the replaced Liquidity Facility, including reinstatement provisions, or in
such other form (which may include a letter of credit, surety bond, financial
insurance policy or guaranty) as will permit the Rating Agencies to confirm in
writing their respective ratings then in effect for the Certificates with
respect to which such Liquidity Facility was issued (before downgrading of such
ratings, if any, as a result of the downgrading of the Liquidity Provider), in a
face
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<PAGE> 33
amount (or in an aggregate face amount) equal to the amount sufficient to pay
interest on the Pool Balance of the Certificates of such Trust (at the Stated
Interest Rate for such Certificates, and without regard to expected future
principal distributions) on the three Regular Distribution Dates following the
date of replacement of such Liquidity Facility, or, if such date is a Regular
Distribution Date, on such day and the two Regular Distribution Dates following
such day, and issued by a person (or persons) having debt ratings issued by both
Rating Agencies that are equal to or higher than the Threshold Rating for the
relevant Class. (Intercreditor Agreement, Section 1.01) The provider of any
Replacement Facility will have the same rights (including, without limitation,
priority distribution rights and rights as Controlling Party) under the
Intercreditor Agreement as the replaced Liquidity Provider.
"Threshold Rating" means (i) with respect to the Class A-1 Liquidity
Provider, the Class A-2 Liquidity Provider and the Class B Liquidity Provider, a
short-term unsecured debt rating of P-1 in the case of Moody's and A-1+ in the
case of Standard & Poor's, and with respect to the Class C Liquidity Provider, a
short-term unsecured debt rating of P-1 in the case of Moody's and A-1 in the
case of Standard & Poor's and (ii) in the case of any person who does not have a
short-term unsecured debt rating from either or both such Rating Agencies, then
in lieu of such short-term unsecured debt rating from such Rating Agency or
Rating Agencies, with respect to the Class A-1 Liquidity Provider, Class A-2
Liquidity Provider and the Class B Liquidity Provider, a long-term unsecured
debt rating of A1 in the case of Moody's and AA- in the case of Standard &
Poor's, and with respect to the Class C Liquidity Provider, a long-term
unsecured debt rating of A1 in the case of Moody's and A in the case of Standard
& Poor's.
The Liquidity Facility for each Trust provides that the Liquidity
Provider's obligations thereunder will expire on the earliest of:
- 364 days after the initial issuance date of the Certificates (counting
from, and including, such issuance date);
- the date on which the Subordination Agent delivers to such Liquidity
Provider a certification that Final Distributions on all of the
Certificates of such Trust have been paid in full or provision has been
made for such payment;
- the date on which the Subordination Agent delivers to such Liquidity
Provider a certification that a Replacement Facility has been substituted
for such Liquidity Facility;
- the fifth Business Day following receipt by the Subordination Agent of a
Termination Notice from such Liquidity Provider (see "-- Liquidity Events
of Default"); and
- the date on which no amount is or may (including by reason of
reinstatement) become available for drawing under such Liquidity
Facility.
Each Liquidity Facility provides that it may be extended for additional
364-day periods by mutual agreement of the relevant Liquidity Provider and the
Subordination Agent.
The Intercreditor Agreement will provide for the replacement of the
Liquidity Facility for any Trust if such Liquidity Facility is scheduled to
expire earlier than 15 days after the Final Legal Distribution Date for the
Certificates of such Trust and such Liquidity Facility is not extended at least
25 days prior to its then scheduled expiration date. If such Liquidity Facility
is not so extended or replaced by the 25th day prior to its then scheduled
expiration date, the Subordination Agent shall request a drawing in full up to
the then Maximum Available Commitment under such Liquidity Facility (the
"Non-Extension Drawing"). The Subordination Agent will hold the proceeds of the
Non-Extension Drawing in the Cash Collateral Account for the related Trust as
cash collateral to be used for the same purposes and under the same
circumstances, and subject to the same conditions, as cash payments of Interest
Drawings under such Liquidity Facility would be used. (Liquidity Facilities,
Section 2.02(b); Intercreditor Agreement, Section 3.06(d))
Subject to certain limitations, American may, at its option, arrange for a
Replacement Facility at any time after 5 years (or earlier upon the occurrence
of certain events) to replace the Liquidity Facility for
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<PAGE> 34
any Trust (including without limitation any Replacement Facility described in
the following sentence). In addition, if any Liquidity Provider determines not
to extend any Liquidity Facility, then such Liquidity Provider may, at its
option, arrange for a Replacement Facility, which must be acceptable to
American, to replace such Liquidity Facility during the period no earlier than
40 days and no later than 25 days prior to the then scheduled expiration date of
such Liquidity Facility. If a Replacement Facility is provided at any time after
a Downgrade Drawing or a Non-Extension Drawing under any Liquidity Facility, the
funds with respect to such Liquidity Facility on deposit in the Cash Collateral
Account for such Trust will be returned to the Liquidity Provider being
replaced. (Intercreditor Agreement, Section 3.06(e))
Upon receipt by the Subordination Agent of a Termination Notice with
respect to any Liquidity Facility from the relevant Liquidity Provider, the
Subordination Agent shall request a final drawing (a "Final Drawing") under such
Liquidity Facility in an amount equal to the then Maximum Available Commitment
thereunder. The Subordination Agent will hold the proceeds of the Final Drawing
in the Cash Collateral Account for the related Trust as cash collateral to be
used for the same purposes and under the same circumstances, and subject to the
same conditions, as cash payments of Interest Drawings under such Liquidity
Facility would be used. (Liquidity Facilities, Section 2.02(d); Intercreditor
Agreement, Section 3.06(i))
Drawings under any Liquidity Facility will be made by delivery by the
Subordination Agent of a certificate in the form required by such Liquidity
Facility. Upon receipt of such a certificate, the relevant Liquidity Provider is
obligated to make payment of the drawing requested thereby in immediately
available funds. Upon payment by the relevant Liquidity Provider of the amount
specified in any drawing under any Liquidity Facility, such Liquidity Provider
will be fully discharged of its obligations under such Liquidity Facility with
respect to such drawing and will not thereafter be obligated to make any further
payments under such Liquidity Facility in respect of such drawing to the
Subordination Agent or any other person.
REIMBURSEMENT OF DRAWINGS
The Subordination Agent must reimburse amounts drawn under any Liquidity
Facility by reason of an Interest Drawing, Final Drawing, Downgrade Drawing or
Non-Extension Drawing and interest thereon, but only to the extent that the
Subordination Agent has funds available therefor.
Interest Drawings and Final Drawings
Amounts drawn under any Liquidity Facility by reason of an Interest Drawing
or Final Drawing (each, a "Drawing") will be immediately due and payable,
together with interest on the amount of such drawing. From the date of such
drawing to (but excluding) the third business day following the Liquidity
Provider's receipt of the notice of such Interest Drawing, interest will accrue
at the Base Rate plus 1.75% per annum. Thereafter, interest will accrue at LIBOR
for the applicable interest period plus 1.75% per annum. In the case of a Final
Drawing, however, the Subordination Agent may convert the Final Drawing into a
drawing bearing interest at the Base Rate plus 1.75% per annum on the last day
of an interest period for such Drawing.
"Base Rate" means a fluctuating interest rate per annum in effect from time
to time, which rate per annum shall at all times be equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for each
day of the period for which the Base Rate is to be determined (or, if such day
is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day for such
transactions received by the applicable Liquidity Provider from three Federal
funds brokers of recognized standing selected by it (and reasonably satisfactory
to American) plus one quarter of one percent (0.25%).
"LIBOR" means, with respect to any interest period, the rate per annum at
which U.S. dollars are offered in the London interbank market as shown on Page
3750 of the Telerate Systems Incorporated screen service (or any successor
thereto), or if such service is not available, Page LIBO of the Reuters Money
Service Monitor System (or any successor thereto) at approximately 11:00 A.M.
(London time)
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<PAGE> 35
two Business Days before the first day of such interest period, for a period
comparable to such interest period, or if such rate is not available, a rate per
annum determined by certain alternative methods.
Downgrade Drawings and Non-Extension Drawings
The amount drawn under any Liquidity Facility by reason of a Downgrade
Drawing or a Non-Extension Drawing and deposited in a Cash Collateral Account
will be treated as follows:
- such amount will be released on any Distribution Date to the Liquidity
Provider to pay any obligations to the Liquidity Provider to the extent
such amount exceeds the Required Amount;
- any portion of such amount withdrawn from the Cash Collateral Account for
such Certificates to pay interest distributions on such Certificates will
be treated in the same way as Interest Drawings; and
- the balance of such amount will be invested in certain specified eligible
investments.
Any Downgrade Drawing or Non-Extension Drawing under any of the Liquidity
Facilities, other than any portion thereof applied to the payment of interest
distributions on the Certificates, will bear interest (x) subject to clause (y)
below, in an amount equal to the investment earnings on amounts deposited in the
Cash Collateral Account attributable to such Liquidity Facility (and will
continue to be subject to payment of a commitment fee on the amount of such
Downgrade Drawing or Non-Extension Drawing) and (y) from and after the date, if
any, on which it is converted into a Final Drawing as described below under
"-- Liquidity Events of Default", at a rate equal to LIBOR for the applicable
interest period (or, as described in the first paragraph under "-- Interest
Drawings and Final Drawings", the Base Rate) plus 1.75% per annum.
LIQUIDITY EVENTS OF DEFAULT
Events of default under each Liquidity Facility (each, a "Liquidity Event
of Default") will consist of:
- the acceleration of all the Equipment Notes; or
- certain bankruptcy or similar events involving American. (Liquidity
Facilities, Section 1.01)
If (i) any Liquidity Event of Default under any Liquidity Facility has
occurred and is continuing and (ii) less than 65% of the aggregate outstanding
principal amount of all Equipment Notes are Performing Equipment Notes, the
applicable Liquidity Provider may, in its discretion, give a notice of
termination of such Liquidity Facility (a "Termination Notice"). The Termination
Notice will have the following consequences:
- the related Liquidity Facility will expire on the fifth Business Day
after the date on which such Termination Notice is received by the
Subordination Agent;
- the Subordination Agent will request promptly, and the Liquidity Provider
will honor, a Final Drawing thereunder in an amount equal to the then
Maximum Available Commitment thereunder;
- any Drawing remaining unreimbursed as of the date of termination will be
converted automatically into a Final Drawing under such Liquidity
Facility; and
- all amounts owing to the Liquidity Provider will become immediately due
and payable.
Notwithstanding the foregoing, the Subordination Agent will be obligated to
pay amounts owing to the applicable Liquidity Provider only to the extent of
funds available therefor after giving effect to the payments in accordance with
the provisions set forth under "Description of the Intercreditor Agreement --
Priority of Distributions". (Liquidity Facilities, Section 6.01)
Upon the circumstances described under "Description of the Intercreditor
Agreement -- Intercreditor Rights", a Liquidity Provider may become the
Controlling Party with respect to the exercise of remedies under the Indentures.
(Intercreditor Agreement, Section 2.06(c))
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<PAGE> 36
LIQUIDITY PROVIDER
The initial Liquidity Provider for each Trust will be Bayerische Landesbank
Girozentrale, a public law banking institution organized under the laws of the
Free State of Bavaria, Germany. Bayerische Landesbank Girozentrale has
short-term debt ratings of P-1 from Moody's and A-1+ from Standard & Poor's.
DESCRIPTION OF THE INTERCREDITOR AGREEMENT
The following summary describes certain provisions of the Intercreditor
Agreement (the "Intercreditor Agreement") among the Trustees, the Liquidity
Provider and State Street Bank and Trust Company of Connecticut, National
Association, as subordination agent (the "Subordination Agent"). The summary
supplements (and, to the extent inconsistent therewith, replaces) the
description of the general terms and provisions relating to the Intercreditor
Agreement and the description of credit enhancements set forth in the
Prospectus. The summary does not purport to be complete and is qualified in its
entirety by reference to all of the provisions of the Intercreditor Agreement,
which will be filed as an exhibit to a Current Report on Form 8-K to be filed by
American with the Commission.
INTERCREDITOR RIGHTS
General
The Equipment Notes relating to each Trust will be issued to and registered
in the name of the Subordination Agent as agent and trustee for the Trustee of
such Trust.
Controlling Party
With respect to any Indenture at any given time, the Loan Trustee under
such Indenture will be directed in taking, or refraining from taking, any action
thereunder or with respect to the Equipment Notes issued under such Indenture by
the holders of at least a majority of the outstanding principal amount of the
Equipment Notes issued under such Indenture, so long as no Indenture Event of
Default shall have occurred and be continuing thereunder. For so long as the
Subordination Agent is the registered holder of the Equipment Notes, the
Subordination Agent will act with respect to the preceding sentence in
accordance with the directions of the Trustees of the Trusts in the Trust
Property of which are Equipment Notes constituting, in the aggregate, the
required principal amount of Equipment Notes. (Intercreditor Agreement, Section
2.06)
At any time after an Indenture Event of Default has occurred and is
continuing under an Indenture, the Loan Trustee under such Indenture will be
directed in taking, or refraining from taking, any action thereunder or with
respect to the Equipment Notes issued under such Indenture, including
acceleration of such Equipment Notes or foreclosing the lien on the related
Aircraft, by the Controlling Party, subject to the limitations described below.
(Intercreditor Agreement, Section 2.06) See "Description of the
Certificates -- Indenture Events of Default and Certain Rights upon an Indenture
Event of Default" for a description of the rights of the Certificateholders of
each Trust to direct the respective Trustees.
The "Controlling Party" will be:
- the Class A-1 Trustee or Class A-2 Trustee, whichever represents the
Class with the larger Pool Balance of Certificates outstanding at the
time that the Indenture Event of Default occurs;
- upon payment of Final Distributions to the holders of such larger Class
of Certificates, the other of the Class A-1 Trustee or Class A-2 Trustee;
- upon payment of Final Distributions to the holders of Class A-1 and Class
A-2 Certificates, the Class B Trustee;
- upon payment of Final Distributions to the holders of Class B
Certificates, the Class C Trustee; and
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- under certain circumstances, and notwithstanding the foregoing, the
Liquidity Provider with the greatest amount owed to it, as discussed in
the next paragraph.
At any time after 18 months from the earliest to occur of (x) the date on
which the entire available amount under any Liquidity Facility has been drawn
(for any reason other than a Downgrade Drawing or a Non-Extension Drawing) and
remains unreimbursed, (y) the date on which the entire amount of any Downgrade
Drawing or Non-Extension Drawing has been withdrawn from the relevant Cash
Collateral Account to pay interest on the relevant Class of Certificates and
remains unreimbursed and (z) the date on which all Equipment Notes have been
accelerated, the Liquidity Provider with the greatest amount of Liquidity
Obligations will have the right to become the Controlling Party with respect to
any Indenture. (Intercreditor Agreement, Section 2.06)
For purposes of giving effect to the rights of the Controlling Party, the
Trustees (other than the Controlling Party) shall irrevocably agree, and the
Certificateholders (other than the Certificateholders represented by the
Controlling Party) will be deemed to agree by virtue of their purchase of
Certificates, that the Subordination Agent, as record Note Holder, will exercise
its voting rights in respect of the Equipment Notes as directed by the
Controlling Party. (Intercreditor Agreement, Sections 2.06 and 8.01(b)) For a
description of certain limitations on the Controlling Party's rights to exercise
remedies, see "-- Sale of Equipment Notes or Aircraft" and "Description of the
Equipment Notes -- Remedies".
"Final Distributions" means, with respect to the Certificates of any Trust
on any Distribution Date, the sum of (x) the aggregate amount of all accrued and
unpaid interest in respect of such Certificates and (y) the Pool Balance of such
Certificates as of the immediately preceding Distribution Date. For purposes of
calculating Final Distributions with respect to the Certificates of any Trust,
any Make-Whole Amount paid on the Equipment Notes held in such Trust that has
not been distributed to the Certificateholders of such Trust (other than such
Make-Whole Amount or a portion thereof applied to the distributions of interest
on the Certificates of such Trust or the reduction of the Pool Balance of such
Trust) shall be added to the amount of such Final Distributions. (Intercreditor
Agreement, Section 1.01)
Sale of Equipment Notes or Aircraft
Following the occurrence and during the continuation of any Indenture Event
of Default under any Indenture, the Controlling Party may direct the
Subordination Agent to accelerate the Equipment Notes issued under such
Indenture and, subject to the provisions of the immediately following sentence,
sell all (but not less than all) of such Equipment Notes or the related Aircraft
to any person. So long as any Certificates are outstanding, during the nine
months after the earlier of (x) the acceleration of the Equipment Notes issued
under any Indenture and (y) the bankruptcy or insolvency of American, without
the consent of each Trustee, no Aircraft subject to the lien of such Indenture
or such Equipment Notes may be sold if the net proceeds from such sale would be
less than the Minimum Sale Price for such Aircraft or such Equipment Notes.
"Minimum Sale Price" means, with respect to any Aircraft or the Equipment
Notes issued in respect of such Aircraft, at any time, the lesser of (i) 75% of
the Appraised Current Market Value of such Aircraft and (ii) the aggregate
outstanding principal amount of such Equipment Notes, plus accrued and unpaid
interest thereon.
PRIORITY OF DISTRIBUTIONS
The subordination terms applicable to the Certificates vary depending upon
whether a Triggering Event has occurred. "Triggering Event" means (i) the
occurrence of an Indenture Event of Default under all Indentures resulting in a
PTC Event of Default with respect to the most senior Class of Certificates then
outstanding, (ii) the acceleration of all of the outstanding Equipment Notes or
(iii) certain bankruptcy or insolvency events involving American.
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Before a Triggering Event
So long as no Triggering Event has occurred (whether or not continuing),
all payments made in respect of the Equipment Notes and certain other payments
received on any Distribution Date will be distributed promptly by the
Subordination Agent on such Distribution Date in the following order of
priority:
- to the Liquidity Provider to the extent required to pay accrued and
unpaid Liquidity Expenses;
- to the Liquidity Provider to the extent required to pay accrued and
unpaid interest on the Liquidity Obligations;
- to the Liquidity Provider to the extent required to pay or reimburse the
Liquidity Provider for certain Liquidity Obligations (other than amounts
payable pursuant to the two preceding clauses) and/or, if applicable, to
replenish each Cash Collateral Account up to the Required Amount;
- to the Class A-1 Trustee and the Class A-2 Trustee to the extent required
to pay Expected Distributions on the Class A-1 Certificates and the Class
A-2 Certificates, except that if available funds are insufficient to pay
Expected Distributions to each such Class in full, available funds will
be distributed to each of the Class A-1 Trustee and the Class A-2 Trustee
in the same proportion as such Trustee's proportionate share of the
aggregate amount of such Expected Distributions;
- to the Class B Trustee to the extent required to pay Expected
Distributions on the Class B Certificates;
- to the Class C Trustee to the extent required to pay Expected
Distributions on the Class C Certificates;
- if the Class D Certificates have been issued, to the Class D Trustee to
the extent required to pay Expected Distributions on the Class D
Certificates; and
- to the Subordination Agent and each Trustee for the payment of certain
fees and expenses.
"Liquidity Expenses" means the Liquidity Obligations other than (i) the
principal amount of any drawing under the Liquidity Facilities and (ii) any
interest accrued on any Liquidity Obligations.
"Liquidity Obligations" means the obligations to reimburse or to pay the
Liquidity Provider all principal, interest, fees and other amounts owing to it
under each Liquidity Facility or certain other agreements.
"Expected Distributions" means, with respect to the Certificates of any
Trust on any Distribution Date (the "Current Distribution Date"), the sum of (1)
accrued and unpaid interest in respect of such Certificates and (2) the
difference between:
(A) the Pool Balance of such Certificates as of the immediately
preceding Distribution Date (or, if the Current Distribution Date is the
first Distribution Date, the original aggregate face amount of the
Certificates of such Trust); and
(B) the Pool Balance of such Certificates as of the Current
Distribution Date calculated on the basis that (i) the principal of the
Equipment Notes held in such Trust has been paid when due (whether at
stated maturity, upon redemption, prepayment, purchase, acceleration or
otherwise) and such payments have been distributed to the holders of such
Certificates and (ii) the principal of any Equipment Notes formerly held in
such Trust that have been sold pursuant to the Intercreditor Agreement has
been paid in full and such payments have been distributed to the holders of
such Certificates. (Intercreditor Agreement, Section 1.01)
For purposes of calculating Expected Distributions with respect to the
Certificates of any Trust, any Make-Whole Amount paid on the Equipment Notes
held in such Trust that has not been distributed to the Certificateholders of
such Trust (other than such Make-Whole Amount or a portion thereof applied to
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distributions of interest on the Certificates of such Trust or the reduction of
the Pool Balance of such Trust) will be added to the amount of Expected
Distributions.
For purposes of determining the priority of distributions on account of the
redemption of Equipment Notes issued pursuant to an Indenture, clause (1) of the
definition of Expected Distributions set forth above shall be deemed to read as
follows: "(1) accrued, due and unpaid interest on such Certificates together
with (without duplication) accrued and unpaid interest on a portion of such
Certificates equal to the outstanding principal amount of the Equipment Notes
being redeemed or prepaid (immediately prior to such redemption or prepayment)".
After a Triggering Event
Subject to the terms of the Intercreditor Agreement, upon the occurrence of
a Triggering Event and at all times thereafter, all funds received by the
Subordination Agent in respect of the Equipment Notes and certain other payments
received by the Subordination Agent will be distributed promptly by the
Subordination Agent in the following order of priority:
- to the Subordination Agent and any Trustee, to the extent required to pay
certain out-of-pocket costs and expenses actually incurred by the
Subordination Agent or such Trustee in protection of, or realization of
the value of, the Equipment Notes or any Collateral under (and as defined
in) any Indenture, or to any Certificateholder or the Liquidity Provider
for payments made to the Subordination Agent or any Trustee in respect of
such amounts;
- to the Liquidity Provider to the extent required to pay the Liquidity
Expenses;
- to the Liquidity Provider to the extent required to pay interest accrued
on the Liquidity Obligations;
- (i) to the Liquidity Provider to the extent required to pay the
outstanding amount of all Liquidity Obligations and/or, (ii) if
applicable with respect to any particular Liquidity Facility (unless (x)
less than 65% of the aggregate outstanding principal amount of all
Equipment Notes are Performing Equipment Notes and a Liquidity Event of
Default has occurred and is continuing under such Liquidity Facility or
(y) a Final Drawing has occurred under such Liquidity Facility), to
replenish the Cash Collateral Account with respect to such Liquidity
Facility up to the Required Amount for the related Class of Certificates
(less the amount of any repayments of Interest Drawings under such
Liquidity Facility while sub-clause (x) of this clause is applicable);
- to the Subordination Agent and any Trustee to the extent required to pay
certain fees, taxes, charges and other amounts payable or to any
Certificateholder for payments made to the Subordination Agent or any
Trustee in respect of such amounts;
- to the Class A-1 Trustee and the Class A-2 Trustee to the extent required
to pay Adjusted Expected Distributions on the Class A-1 Certificates and
the Class A-2 Certificates, except that if available funds are
insufficient to pay Adjusted Expected Distributions to each such Class in
full, available funds will be distributed to each of the Class A-1
Trustee and the Class A-2 Trustee in the same proportion as such
Trustee's proportionate share of the aggregate amount of such Adjusted
Expected Distributions;
- to the Class B Trustee to the extent required to pay Adjusted Expected
Distributions on the Class B Certificates;
- to the Class C Trustee to the extent required to pay Adjusted Expected
Distributions on the Class C Certificates;
- if the Class D Certificates have been issued, to the Class D Trustee to
the extent required to pay Adjusted Expected Distributions on the Class D
Certificates;
- to the Class A-1 Trustee and the Class A-2 Trustee to the extent required
to pay Final Distributions on the Class A-1 Certificates and the Class
A-2 Certificates in full, except that if available funds are insufficient
so to pay each such Class in full, available funds will be distributed
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<PAGE> 40
to each of the Class A-1 Trustee and the Class A-2 Trustee in the same
proportion as such Trustee's proportionate share of such amount;
- to the Class B Trustee to the extent required to pay Final Distributions
on the Class B Certificates in full;
- to the Class C Trustee to the extent required to pay Final Distributions
on the Class C Certificates in full; and
- if the Class D Certificates have been issued, to the Class D Trustee to
the extent required to pay Final Distributions on the Class D
Certificates in full.
"Adjusted Expected Distributions" means, with respect to the Certificates
of any Trust on any Current Distribution Date, the sum of (1) accrued and unpaid
interest in respect of such Certificates and (2) the greater of:
(A) the difference between (x) the Pool Balance of such Certificates
as of the immediately preceding Distribution Date (or, if the Current
Distribution Date is the first Distribution Date, the original aggregate
face amount of the Certificates of such Trust) and (y) the Pool Balance of
such Certificates as of the Current Distribution Date calculated on the
basis that (i) the principal of the Equipment Notes other than Performing
Equipment Notes (the "Non-Performing Equipment Notes") held in such Trust
has been paid in full and such payments have been distributed to the
holders of such Certificates, (ii) the principal of the Performing
Equipment Notes held in such Trust has been paid when due (but without
giving effect to any acceleration of Performing Equipment Notes) and such
payments have been distributed to the holders of such Certificates and
(iii) the principal of any Equipment Notes formerly held in such Trust that
have been sold pursuant to the Intercreditor Agreement has been paid in
full and such payments have been distributed to the holders of such
Certificates; and
(B) the amount of the excess, if any, of (i) the Pool Balance of such
Class of Certificates as of the immediately preceding Distribution Date
(or, if the Current Distribution Date is the first Distribution Date, the
original aggregate face amount of the Certificates of such Trust), over
(ii) the Aggregate LTV Collateral Amount for such Class of Certificates for
the Current Distribution Date;
provided that, until the date of the initial LTV Appraisals, clause (B) shall
not apply.
For purposes of calculating Adjusted Expected Distributions with respect to
the Certificates of any Trust, any Make-Whole Amount paid on the Equipment Notes
held in such Trust that has not been distributed to the Certificateholders of
such Trust (other than such Make-Whole Amount or a portion thereof applied to
distributions of interest on the Certificates of such Trust or the reduction of
the Pool Balance of such Trust) will be added to the amount of Adjusted Expected
Distributions.
"Aggregate LTV Collateral Amount" for any Class of Certificates for any
Distribution Date means an amount, not less than zero, equal to the product of
(i) the sum of the applicable LTV Collateral Amounts for such Class of
Certificates for all Aircraft, minus the Pool Balance for each Class of
Certificates, if any, senior to such Class, after giving effect to any
distribution of principal on such Distribution Date with respect to such senior
Class or Classes multiplied by (ii) (a) in the case of Class A-1 Certificates or
Class A-2 Certificates, a fraction the numerator of which equals the Pool
Balance for the Class A-1 Certificates or Class A-2 Certificates, as the case
may be, and the denominator of which equals the aggregate Pool Balances for the
Class A-1 Certificates and the Class A-2 Certificates, in each case prior to
giving effect to any distribution of principal on such Distribution Date with
respect to either such Class of Certificates, and (b) in the case of the Class B
and Class C Certificates, 1.0.
"LTV Collateral Amount" of any Aircraft for any Class of Certificates
means, as of any Distribution Date, the lesser of (i) the LTV Ratio for such
Class of Certificates multiplied by the Appraised Current Market Value of such
Aircraft (or with respect to any such Aircraft that has suffered an Event of
Loss under and as defined in the relevant Indenture, the amount of the insurance
proceeds paid to the related
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Loan Trustee in respect thereof to the extent then held by such Loan Trustee
(and/or on deposit in the Special Payments Account) or payable to such Loan
Trustee in respect thereof or with respect to any such Aircraft that has been
released from the related Indenture pursuant to the defeasance provisions
thereof, the amount of money and U.S. Government Obligations deposited with the
Loan Trustee pursuant thereto as of such Distribution Date) and (ii) the
outstanding principal amount of the Equipment Notes secured by such Aircraft
after giving effect to any principal payments of such Equipment Notes on or
before such Distribution Date.
"LTV Ratio" means for the Class A-1 Certificates and the Class A-2
Certificates 45.0%, for the Class B Certificates 57.0% and for the Class C
Certificates 62.0%.
"Appraised Current Market Value" of any Aircraft means the lower of the
average and the median of the three most recent LTV Appraisals of such Aircraft.
After a Triggering Event occurs and any Equipment Note becomes a
Non-Performing Equipment Note, the Subordination Agent will obtain LTV
Appraisals of all of the Aircraft as soon as practicable and additional LTV
Appraisals on or prior to each anniversary of the date of such initial LTV
Appraisals; provided that if the Controlling Party reasonably objects to the
appraised value of the Aircraft shown in such LTV Appraisals, the Controlling
Party shall have the right to obtain or cause to be obtained substitute LTV
Appraisals (including LTV Appraisals based upon physical inspection of such
Aircraft).
"LTV Appraisal" means a current fair market value appraisal (which may be a
"desk-top" appraisal) performed by any Appraiser or any other nationally
recognized appraiser on the basis of an arm's-length transaction between an
informed and willing purchaser under no compulsion to buy and an informed and
willing seller under no compulsion to sell and both having knowledge of all
relevant facts.
Interest Drawings under the Liquidity Facility and withdrawals from the
Cash Collateral Account, in each case in respect of interest distributable on
the Certificates of any Trust, will be distributed to the Trustee for such
Trust, notwithstanding the priority of distributions set forth in the
Intercreditor Agreement and otherwise described herein.
ADDITION OF TRUSTEE FOR CLASS D CERTIFICATES
If the Class D Certificates are issued, the Class D Trustee will become a
party to the Intercreditor Agreement and the Intercreditor Agreement will be
appropriately amended. (Intercreditor Agreement, Section 8.01(c)).
THE SUBORDINATION AGENT
State Street Bank and Trust Company of Connecticut, National Association,
initially will be the Subordination Agent under the Intercreditor Agreement.
American and its affiliates may from time to time enter into banking and trustee
relationships with the Subordination Agent and its affiliates. The Subordination
Agent's address is State Street Bank and Trust Company of Connecticut, National
Association, 225 Asylum Street, Goodwin Square, Hartford, Connecticut 06103,
Attention: Corporate Trust Division.
The Subordination Agent may resign at any time, in which event a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. American or the Controlling Party may at any time remove the
Subordination Agent as provided in the Intercreditor Agreement. In such
circumstances, a successor Subordination Agent will be appointed as provided in
the Intercreditor Agreement. Any resignation or removal of the Subordination
Agent and appointment of a successor Subordination Agent does not become
effective until acceptance of the appointment by the successor Subordination
Agent. (Intercreditor Agreement, Section 7.01)
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DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS
THE AIRCRAFT
The Aircraft consist of ten Boeing 737-823 aircraft, three Boeing 767-323ER
aircraft and two Boeing 777-223 aircraft (collectively, the "Aircraft"), all of
which have been delivered to American by the manufacturer. The Aircraft have
been designed to be in compliance with Stage 3 noise level standards, which are
the most restrictive regulatory standards currently in effect in the United
States for aircraft noise abatement.
The Boeing 737-823 is a narrowbody commercial jet aircraft. Seating
capacity in American's two-class configuration is 146 for the 737-823. The
737-823 is powered by two CFM56-7B26 model commercial jet engines manufactured
by CFM International, Inc.
The Boeing 767-323ER and 777-223 are both widebody commercial jet aircraft.
Seating capacity in American's three-class configuration is 207 for the
767-323ER and 237 for the 777-223. The 767-323ER is powered by two CF6-80C2B6
model commercial jet engines manufactured by The General Electric Company. The
777-223 is powered by two RB211-TRENT-892-17 model commercial jet engines
manufactured by Rolls Royce Ltd.
THE APPRAISALS
The table below sets forth the appraised base values of the Aircraft as
determined by Aircraft Information Systems, Inc. ("AISI"), Aviation Solutions,
Inc. ("AvSolutions") and Morten Beyer & Agnew, Inc. ("MBA", and together with
AISI and AvSolutions, the "Appraisers"), independent aircraft appraisal and
consulting firms, and certain additional information regarding the Aircraft.
<TABLE>
<CAPTION>
U.S. APPRAISERS' VALUATIONS APPRAISED
REGISTRATION AIRCRAFT DATE ------------------------------------------ BASE
NUMBER TYPE DELIVERED AISI AVSOLUTIONS MBA VALUE(1)
- ------------ -------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
N908AN............... Boeing 737-823 05/13/1999 $ 47,630,000 $ 46,950,000 $ 44,180,000 $ 46,253,333
N909AN............... Boeing 737-823 05/19/1999 47,640,000 46,950,000 44,180,000 46,256,667
N910AN............... Boeing 737-823 05/26/1999 47,640,000 46,950,000 44,180,000 46,256,667
N912AN............... Boeing 737-823 06/25/1999 47,700,000 46,950,000 44,270,000 46,306,667
N914AN............... Boeing 737-823 07/19/1999 47,740,000 47,243,000 44,360,000 46,447,667
N915AN............... Boeing 737-823 07/28/1999 47,750,000 47,243,000 44,360,000 46,451,000
N916AN............... Boeing 737-823 08/05/1999 47,760,000 47,243,000 44,440,000 46,481,000
N917AN............... Boeing 737-823 08/27/1999 47,760,000 47,243,000 44,440,000 46,481,000
N918AN............... Boeing 737-823 09/10/1999 47,760,000 47,243,000 44,530,000 46,511,000
N919AN............... Boeing 737-823 09/15/1999 47,760,000 47,243,000 44,530,000 46,511,000
N394AN............... Boeing 767-323ER 06/13/1998 86,310,000 86,510,000 86,270,000 86,310,000
N398AN............... Boeing 767-323ER 04/30/1999 90,360,000 90,430,000 89,340,000 90,043,333
N399AN............... Boeing 767-323ER 05/28/1999 90,480,000 90,430,000 89,520,000 90,143,333
N778AN............... Boeing 777-223 06/21/1999 133,240,000 132,930,000 131,300,000 132,490,000
N779AN............... Boeing 777-223 06/27/1999 133,270,000 132,930,000 131,300,000 132,500,000
</TABLE>
- ---------------
(1) The appraised base value of each Aircraft is the lesser of the average and
median base values of such Aircraft as set forth by the three Appraisers.
According to the International Society of Transport Aircraft Trading,
"appraised base value" is defined as each Appraiser's opinion of the underlying
economic value of an Aircraft in an open, unrestricted, stable market
environment with a reasonable balance of supply and demand, and assumes full
consideration of its "highest and best use". An Aircraft's appraised base value
is founded in the historical trend of values and in the projection of value
trends and presumes an arm's length, cash transaction between willing, able and
knowledgeable parties, acting prudently, with an absence of duress and with a
reasonable period of time available for marketing.
Each Appraiser was asked to provide its opinion as to the appraised base
value of each Aircraft. All three Appraisers performed "desk-top" appraisals
without any physical inspection of the Aircraft. The Appraisals are based on
various assumptions and methodologies which vary among the Appraisals and may
not reflect current market conditions. Appraisals that are based on different
assumptions and methodologies may result in valuations that are materially
different from those contained in the Appraisals.
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The Appraisers have delivered letters setting forth their respective Appraisals,
copies of which are annexed to this Prospectus Supplement as Appendix II. For a
discussion of the assumptions and methodologies used in each of the Appraisals,
you should read such letters.
An appraisal is only an estimate of value. It does not necessarily indicate
the price at which an aircraft may be purchased from the manufacturer. Nor
should it be relied upon as a measure of realizable value. The proceeds realized
upon a sale of any Aircraft may be less than its appraised value. In addition,
the value of the Aircraft in the event of the exercise of remedies under the
applicable Indenture will depend on market and economic conditions at the time,
the availability of buyers, the condition of the Aircraft, whether the Aircraft
are sold separately or in one or more groups and other factors. Accordingly,
there can be no assurance that the proceeds realized upon any such exercise of
remedies with respect to the Aircraft pursuant to the applicable Indenture would
equal the appraised value of such Aircraft or be sufficient to satisfy in full
payments due on the Equipment Notes relating to such Aircraft or the
Certificates.
DESCRIPTION OF THE EQUIPMENT NOTES
The following summary describes certain terms of the Equipment Notes and
supplements (and, to the extent inconsistent therewith, replaces) the
description of the general terms and provisions relating to the Equipment Notes,
the Indentures and the Participation Agreements set forth in the Prospectus. The
summaries do not purport to be complete and make use of terms defined in and are
qualified in their entirety by reference to all of the provisions of the
Equipment Notes, the Indentures and the Participation Agreements, forms of each
of which will be filed as exhibits to a Current Report on Form 8-K to be filed
by American with the Commission. Except as otherwise indicated, the following
summaries relate to the Equipment Notes, the Indenture and the Participation
Agreement applicable to each Aircraft.
GENERAL
Pursuant to the terms of a Participation Agreement among American, the
Trustees, the Subordination Agent and the Loan Trustee with respect to each
Aircraft (each, a "Participation Agreement"), the Trusts will purchase from
American the Equipment Notes to be issued under the related Indenture. Equipment
Notes will be issued in four series with respect to each Aircraft: the "Series
A-1 Equipment Notes", the "Series A-2 Equipment Notes", the "Series B Equipment
Notes" and the "Series C Equipment Notes" (collectively, the "Equipment Notes").
American may elect to issue an additional series with respect to some or all of
the Aircraft (the "Series D Equipment Notes"), which would be funded from
sources other than this offering. See "Description of the
Certificates -- Possible Issuance of Class D Certificates". The Equipment Notes
with respect to each Aircraft will be issued under a separate indenture (each,
an "Indenture") between American and State Street Bank and Trust Company of
Connecticut, National Association, as loan trustee thereunder (each, a "Loan
Trustee"). The Equipment Notes will be direct, full recourse obligations of
American.
SUBORDINATION
The Indentures provide for the following subordination provisions
applicable to the Equipment Notes:
- Series A-1 and Series A-2 Equipment Notes issued in respect of an
Aircraft will rank equally in right of payment and will rank senior in
right of payment to other Equipment Notes issued in respect of such
Aircraft;
- Series B Equipment Notes issued in respect of an Aircraft will rank
junior in right of payment to the Series A-1 and Series A-2 Equipment
Notes issued in respect of such Aircraft and will rank senior in right of
payment to the Series C and, if applicable, Series D Equipment Notes
issued in respect of such Aircraft;
- Series C Equipment Notes issued in respect of an Aircraft will rank
junior in right of payment to the Series A-1, Series A-2 and Series B
Equipment Notes issued in respect of such Aircraft and, if
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Series D Equipment Notes are issued with respect to such Aircraft, senior
in right of payment to such Series D Equipment Notes; and
- if American elects to issue Series D Equipment Notes with respect to an
Aircraft, they will be subordinated in right of payment to the Series
A-1, Series A-2, Series B and Series C Equipment Notes issued with
respect to such Aircraft.
PRINCIPAL AND INTEREST PAYMENTS
Subject to the provisions of the Intercreditor Agreement, scheduled
installments of interest paid on the Equipment Notes held in each Trust will be
passed through to the Certificateholders of such Trust on the dates and at the
rate per annum set forth on the cover page of this Prospectus Supplement until
the final expected Regular Distribution Date for such Trust. Subject to the
provisions of the Intercreditor Agreement, principal paid on the Equipment Notes
held in each Trust will be passed through to the Certificateholders of such
Trust in scheduled amounts on the dates set forth herein until the final
expected Regular Distribution Date for such Trust.
Interest will be payable on the unpaid principal amount of each Equipment
Note at the rate applicable to such Equipment Note on April 15 and October 15 of
each year, commencing on April 15, 2000. Such interest will be computed on the
basis of a 360-day year of twelve 30-day months. Overdue amounts of principal,
Make-Whole Amount (if any) and interest on such series of Equipment Notes will,
to the extent permitted by applicable law, bear interest at the interest rate
applicable to such series of Equipment Notes, which interest rate will be equal
to the rate per annum applicable to the Certificates issued by the Trust that
will hold such series of Equipment Notes set forth on the cover page of this
Prospectus Supplement plus 1%.
Scheduled principal payments on the Series A-1 Equipment Notes will be made
on April 15 and October 15 in certain years, commencing on April 15, 2000 and
ending on April 15, 2009. The entire principal amounts of the Series A-2, Series
B and Series C Equipment Notes are scheduled to be paid on October 15, 2009,
October 15, 2009 and October 15, 2004, respectively. See "Description of the
Certificates -- Pool Factors" for a discussion of the scheduled payments of
principal of the Equipment Notes and Appendix III for the schedule of payments
of principal of each Equipment Note issued with respect to each Aircraft.
If any date scheduled for a payment of principal, Make-Whole Amount (if
any) or interest with respect to the Equipment Notes is not a Business Day, such
payment will be made on the next succeeding Business Day without any additional
interest.
REDEMPTION
If an Event of Loss occurs with respect to an Aircraft and such Aircraft is
not replaced by American under the related Indenture, American is required to
redeem the Equipment Notes issued with respect to such Aircraft, in whole, at a
price equal to the aggregate unpaid principal amount thereof, together with
accrued and unpaid interest thereon to (but excluding) the date of redemption,
but without any Make-Whole Amount. Any amount paid by American in connection
with such redemption will be distributed to the Certificateholders on a Special
Distribution Date. (Indentures, Section 2.10)
All of the Equipment Notes issued with respect to an Aircraft may be
redeemed in whole prior to maturity at any time at the option of American, at a
price equal to the aggregate unpaid principal amount thereof, together with
accrued and unpaid interest thereon to (but excluding) the date of redemption,
plus the Make-Whole Amount for the applicable series of Equipment Notes.
(Indentures, Section 2.11)
Notice of redemption will be given to each holder of Equipment Notes not
less than 15 nor more than 60 days prior to the applicable redemption date. A
notice of redemption may be revoked not later than three days before the
proposed redemption date. (Indentures, Section 2.11)
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"Make-Whole Amount" means, with respect to any Equipment Note, the amount
(as determined by an independent investment bank selected by American), if any,
by which (a) the present value of the remaining scheduled payments of principal
and interest from the redemption date to maturity of such Equipment Note
computed by discounting each such payment on a semiannual basis from its
respective payment date under the applicable Indenture (assuming a 360-day year
of twelve 30-day months) using a discount rate equal to the Treasury Yield
exceeds (b) the outstanding principal amount of such Equipment Note plus accrued
but unpaid interest thereon to the redemption date. (Indentures, Annex A)
For purposes of determining the Make-Whole Amount, "Treasury Yield" means,
at the date of determination with respect to any Equipment Note, the interest
rate (expressed as a semiannual equivalent and as a decimal and, in the case of
United States Treasury bills, converted to a bond equivalent yield) determined
to be the per annum rate equal to the semiannual yield to maturity for United
States Treasury securities maturing on the Average Life Date of such Equipment
Note and trading in the public securities markets either as determined by
interpolation between the most recent weekly average yield to maturity for two
series of United States Treasury securities trading in the public securities
markets, (A) one maturing as close as possible to, but earlier than, the Average
Life Date of such Equipment Note and (B) the other maturing as close as possible
to, but later than, the Average Life Date of such Equipment Note, in each case
as published in the most recent H.15(519) or, if a weekly average yield to
maturity for United States Treasury securities maturing on the Average Life Date
of such Equipment Note is reported in the most recent H.15(519), such weekly
average yield to maturity as published in such H.15(519). "H.15(519)" means the
weekly statistical release designated as such, or any successor publication,
published by the Board of Governors of the Federal Reserve System, and the "most
recent H.15(519)" means the H.15(519) published prior to the close of business
on the third Business Day prior to the applicable redemption date. The "date of
determination" of a Make-Whole Amount will be the third Business Day prior to
the applicable redemption date. (Indentures, Annex A)
"Average Life Date" for any Equipment Note means the date that follows the
redemption date by a period equal to the Remaining Weighted Average Life at the
redemption date of such Equipment Note. "Remaining Weighted Average Life" at the
redemption date of such Equipment Note means the number of days equal to the
quotient obtained by dividing (a) the sum of each of the products obtained by
multiplying (i) the amount of each then remaining installment of principal of
such Equipment Note by (ii) the number of days from and including the redemption
date to but excluding the scheduled payment date of such principal installment,
by (b) the then unpaid principal amount of such Equipment Note.
SECURITY
The Equipment Notes issued with respect to each Aircraft will be secured by
a security interest in the Aircraft, certain limited rights under the aircraft
purchase agreement between American and Boeing, certain requisition and
insurance proceeds with respect to such Aircraft, and all proceeds of the
foregoing. (Indentures, Granting Clause)
The Equipment Notes will not be cross-collateralized and, consequently, the
Equipment Notes issued in respect of any one Aircraft will not be secured by any
of the other Aircraft. See "-- Remedies".
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
The tables in Appendix IV set forth loan to Aircraft value ratios for the
Equipment Notes issued in respect of each Aircraft as of the issuance date of
the Certificates and each October 15 Regular Distribution Date. The LTVs were
obtained by dividing (i) the outstanding principal amount (assuming no payment
default or early redemption) of such Equipment Notes determined immediately
after giving effect to the payments scheduled to be made on each such Regular
Distribution Date by (ii) the assumed value (the "Assumed Aircraft Value") of
the Aircraft securing such Equipment Notes.
The tables in Appendix IV are based on the assumption that the initial
appraised base value of the Aircraft set forth opposite the initial Regular
Distribution Date included in each table depreciates by 3% of the initial
appraised base value per year. Other rates or methods of depreciation would
result in materially
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different LTVs, and no assurance can be given (i) that the depreciation rate and
method assumed for the purposes of the tables are the ones most likely to occur
or (ii) as to the actual future value of any Aircraft. Thus the tables should
not be considered a forecast or prediction of expected or likely LTVs, but
simply a mathematical calculation based on one set of assumptions.
DEFEASANCE
Under certain circumstances, American may legally release itself from any
payment or other obligations on all, but not less than all, of the Equipment
Notes issued under one or more Indentures (a "full defeasance") if American puts
in place the following arrangements for the benefit of the holders of such
Equipment Notes:
- American must deposit in trust for the benefit of the holders of such
Equipment Notes a combination of money and direct obligations of the
United States (and certain depository receipts representing interests in
such direct obligations) ("U.S. Government Obligations") that will
generate enough money to pay when due the principal of and interest on
the Equipment Notes; and
- American must deliver to the Trustees and the relevant Loan Trustee a
legal opinion stating that there has been a change in the federal tax law
from such law as in effect on the date of this Prospectus Supplement or
that there has been an IRS ruling, in either case that lets American make
the above deposit without causing the holders of the Certificates to be
taxed on their Certificates any differently than if American did not make
the deposit and simply repaid the Equipment Notes itself.
If American were to accomplish full defeasance, as described above, holders
of the Equipment Notes so defeased would rely solely on the trust deposit for
repayment on such Equipment Notes. Holders of such Equipment Notes could not
look to American for repayment if a shortfall in the payment of principal of or
interest on such Equipment Notes occurred. In addition, the holders of such
Equipment Notes would have no beneficial interest in or other rights with
respect to the related Aircraft or other assets subject to the lien of the
related Indenture and such lien would terminate. (Indentures, Section 10.01)
LIMITATION OF LIABILITY
Except as otherwise provided in the Indentures, the Loan Trustee, in its
individual capacity, will not be answerable or accountable under the Indentures
or the Equipment Notes under any circumstances except, among other things, for
its own willful misconduct or negligence.
INDENTURE EVENTS OF DEFAULT, NOTICE AND WAIVER
"Indenture Events of Default" under each Indenture will include:
- the failure by American to pay any interest or principal or Make-Whole
Amount, if any, within 15 days after the same has become due on any
Equipment Note;
- the failure by American to pay any amount (other than interest, principal
or Make-Whole Amount, if any) when due under the Indenture, any Equipment
Note or any other operative documents for more than 30 days after
American receives written notice;
- the failure by American to carry and maintain insurance or indemnity on
or with respect to the Aircraft in accordance with the provisions of the
Indenture; provided that no such failure to carry and maintain insurance
will constitute an Indenture Event of Default until the earlier of (i)
the date such failure has continued unremedied for a period of 30 days
after the Loan Trustee receives notice of the cancellation or lapse of
such insurance or (ii) the date such insurance is not in effect as to the
Loan Trustee;
- the failure by American to perform or observe any other covenant or
condition to be performed or observed by it under any operative document
that continues for a period of 60 days after notice to
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American; provided that, if such failure is capable of being remedied, no
such failure will constitute an Indenture Event of Default for a period
of one year after such notice is received by American so long as American
is diligently proceeding to remedy such failure;
- any representation or warranty made by American in the related operative
documents proves to have been incorrect in any material respect when
made, and such incorrectness continues to be material to the transactions
contemplated by the Indenture and remains unremedied for a period of 60
days after notice to American; provided that, if such incorrectness is
capable of being remedied, no such incorrectness will constitute an
Indenture Event of Default for a period of one year after such notice is
received by American so long as American is diligently proceeding to
remedy such incorrectness; and
- the occurrence of certain events of bankruptcy, reorganization or
insolvency of American.
(Indentures, Section 4.01)
There will not be any cross-default provisions in the Indentures.
Consequently, events resulting in an Indenture Event of Default under any
particular Indenture may or may not result in an Indenture Event of Default
occurring under any other Indenture. If the Equipment Notes issued with respect
to one or more Aircraft are in default and the Equipment Notes issued with
respect to the remaining Aircraft are not in default, no remedies will be
exercisable under the Indentures with respect to such remaining Aircraft.
The holders of a majority in aggregate unpaid principal amount of the
Equipment Notes outstanding on a given date and issued with respect to any
Aircraft, by written instruction to the Loan Trustee, may on behalf of all the
Note Holders waive any existing default and its consequences under the Indenture
with respect to such Aircraft, except a default in the payment of the principal
of, Make-Whole Amount, if any, or interest due under any such Equipment Notes or
a default in respect of any covenant or provision of such Indenture that cannot
be modified or amended without the consent of each Note Holder. (Indentures,
Section 4.05)
REMEDIES
The exercise of remedies under the Indentures will be subject to the terms
of the Intercreditor Agreement, and the following description should be read in
conjunction with the description of the Intercreditor Agreement.
If an Indenture Event of Default occurs and is continuing under an
Indenture, the related Loan Trustee may, and upon receipt of written
instructions of the holders of a majority in principal amount of the Equipment
Notes then outstanding under such Indenture will, declare the principal of all
such Equipment Notes issued thereunder immediately due and payable, together
with all accrued but unpaid interest thereon (but without any Make-Whole
Amount). The holders of a majority in principal amount of Equipment Notes
outstanding under an Indenture may rescind any declaration of acceleration of
such Equipment Notes if (i) there has been paid to the related Loan Trustee an
amount sufficient to pay all overdue installments of principal and interest on
any such Equipment Notes, and all other amounts owing under the operative
documents, that have become due otherwise than by such declaration of
acceleration and (ii) all other Indenture Events of Default, other than
nonpayment of principal amount or interest on the Equipment Notes that have
become due solely because of such acceleration, have been cured or waived.
(Indentures, Section 4.02(d))
Each Indenture provides that if an Indenture Event of Default under such
Indenture has occurred and is continuing, the related Loan Trustee may exercise
certain rights or remedies available to it under such Indenture or under
applicable law. Such remedies include the right to take possession of the
Aircraft and to sell all or any part of the airframe or any engine comprising
the Aircraft subject to such Indenture.
If the Equipment Notes issued in respect of one Aircraft are in default,
the Equipment Notes issued in respect of the other Aircraft may not be in
default, and, if not, no remedies will be exercisable under the applicable
Indentures with respect to such other Aircraft.
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Section 1110 of the Bankruptcy Code ("Section 1110") provides in relevant
part that the right of a secured party with a security interest in "equipment"
(as defined in Section 1110) to take possession of such equipment in compliance
with the provisions of a security agreement is not affected by:
- the automatic stay provision of the Bankruptcy Code, which provision
enjoins repossessions by creditors for the duration of the reorganization
period;
- the provision of the Bankruptcy Code allowing the debtor-in-possession or
the trustee in reorganization to use, sell or lease property of the
debtor during the reorganization period;
- Section 1129 of the Bankruptcy Code (which governs the confirmation of
plans of reorganization in Chapter 11 cases); or
- any power of the bankruptcy court to enjoin a repossession.
Section 1110, however, provides that the right of a secured party to take
possession of an aircraft following an event of default may not be exercised for
60 days following the date of commencement of the reorganization proceedings
(unless specifically permitted by the bankruptcy court) and may not be exercised
at all if, within such 60-day period (or such longer period consented to by such
secured party), the debtor-in-possession or the trustee in reorganization agrees
to perform the debtor's obligations that become due on or after such date under
the security agreement and cures all existing defaults thereunder (other than
defaults resulting solely from the financial condition, bankruptcy, insolvency
or reorganization of the debtor, the appointment of a trustee or custodian or
the failure to satisfy any penalty rate or provision relating to a default
arising from any failure by the debtor to perform nonmonetary obligations under
the applicable agreement).
"Equipment" is defined in Section 1110, in part, as an aircraft, aircraft
engine, appliance, or spare part (as defined in Section 40102 of Title 49 of the
United States Code) that is subject to a security interest granted by a debtor
that is a citizen of the United States (as defined in Section 40102 of Title 49
of the United States Code) holding an air carrier operating certificate issued
by the Secretary of Transportation pursuant to Chapter 447 of Title 49 of the
United States Code for aircraft capable of carrying ten or more individuals or
6,000 pounds or more of cargo.
It is a condition to the Trustee's obligation to purchase Equipment Notes
with respect to each Aircraft that American's General Counsel provide her
opinion to the Trustees that the Loan Trustee will be entitled to the benefits
of Section 1110 with respect to the airframe and engines comprising the Aircraft
originally subjected to the lien of the relevant Indenture. This opinion is
subject to certain qualifications and assumptions, including the assumptions
that American is and will continue to be a "citizen of the United States" as
defined in Section 40102 of Title 49 of the United States Code and that American
will continue to hold an air carrier operating certificate issued by the
Secretary of Transportation pursuant to Chapter 447 of Title 49 of the United
States Code for aircraft capable of carrying ten or more individuals or 6,000
pounds or more of cargo.
The opinion of American's General Counsel will not address the possible
replacement of an Aircraft after an Event of Loss in the future, the
consummation of which is conditioned upon the contemporaneous delivery of an
opinion of counsel to the effect that the related Loan Trustee will be entitled
to Section 1110 benefits with respect to the replacement airframe unless there
is a change in law or court interpretation that results in Section 1110 not
being available. See "-- Certain Provisions of the Indentures -- Events of
Loss". The opinion of American's General Counsel also will not address the
availability of Section 1110 with respect to the bankruptcy proceedings of any
possible lessee of an Aircraft if it is leased by American.
During 1998, the U.S. District Court for the District of Colorado issued
opinions arising from the bankruptcy proceedings of Western Pacific Airlines,
Inc. relating to Section 1110. The decisions held that, once an airline debtor
reaffirms its obligations and cures its defaults under an aircraft lease within
the prescribed period in accordance with Section 1110, the lessor under such
lease is not entitled to repossess the aircraft under Section 1110 if the
airline subsequently defaults under such lease. American has been
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advised by its special counsel, Debevoise & Plimpton, that in the opinion of
such firm, such District Court holdings are erroneous because they are
inconsistent with the overriding purpose of Section 1110 to protect creditors
secured by qualifying aircraft against being stayed from exercising their rights
while defaults under their financing agreements remain uncured.
In certain circumstances following the bankruptcy or insolvency of American
where the obligations of American under any Indenture exceed the value of the
Aircraft collateral under such Indenture, post-petition interest will not accrue
on the related Equipment Notes. In addition, to the extent that distributions
are made to any Certificateholders, whether under the Intercreditor Agreement or
from drawings on the Liquidity Facilities, in respect of amounts that would have
been funded by post-petition interest payments on such Equipment Notes had such
payments been made, there would be a shortfall between the claim allowable
against American on such Equipment Notes after the disposition of the Aircraft
collateral securing such Equipment Notes and the remaining balance of the
Certificates. Such shortfall would first reduce some or all of the remaining
claim against American available to the Trustees for the most junior Classes.
If an Indenture Event of Default under any Indenture occurs and is
continuing, any sums held or received by the related Loan Trustee may be applied
to reimburse such Loan Trustee for any tax, expense or other loss incurred by it
and to pay any other amounts due to such Loan Trustee prior to any payments to
holders of the Equipment Notes issued under such Indenture. (Indentures, Section
3.03)
MODIFICATION OF INDENTURES
Without the consent of holders of a majority in principal amount of the
Equipment Notes outstanding under any Indenture, the provisions of such
Indenture may not be amended or modified, except to the extent indicated below.
Any Indenture may be amended without the consent of the Note Holders to,
among other things: (i) cure any defect or inconsistency in such Indenture or
the Equipment Notes issued thereunder; (ii) make any other provisions or
amendments with respect to matters or questions arising under such Indenture or
such Equipment Notes, or to amend, modify or supplement any provision thereof,
provided that such action does not adversely affect the interests of any such
holder; (iii) cure any ambiguity or correct any mistake; (iv) provide for
compliance with applicable law; or (v) provide for the issuance of Series D
Equipment Notes. (Indentures, Section 9.01)
Without the consent of the holder of each Equipment Note outstanding under
any Indenture affected thereby, no amendment or modification of such Indenture
may, among other things, (i) reduce the principal amount of, or Make-Whole
Amount, if any, or interest payable on, any Equipment Notes issued under such
Indenture or change the date on which any principal, Make-Whole Amount, if any,
or interest is due and payable, (ii) create any lien with respect to the
Collateral (as defined in such Indenture) prior to or pari passu with the lien
of such Indenture, except as provided in such Indenture, or deprive any holder
of an Equipment Note issued under such Indenture of the benefit of the lien of
such Indenture upon the Collateral or (iii) reduce the percentage in principal
amount of outstanding Equipment Notes issued under such Indenture required to
take or approve any action under such Indenture. (Indentures, Section 9.02(a))
INDEMNIFICATION
American will be required to indemnify each Loan Trustee, each Liquidity
Provider, the Subordination Agent, and each Trustee, but not the holders of
Certificates, for certain losses, claims and other matters. (Participation
Agreement, Section 4.02)
The Loan Trustee will not be required to take any action or refrain from
taking any action (other than notifying the Note Holders if it knows of an Event
of Default or of a default arising from American's failure to pay overdue
principal, interest or Make-Whole Amount, if any, under any Equipment Note),
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unless it has received indemnification satisfactory to it against any risks
incurred in connection therewith. (Indentures, Section 5.03).
CERTAIN PROVISIONS OF THE INDENTURES
Maintenance and Operation
Under the terms of each Indenture, American will be obligated, among other
things and at its expense, to keep each Aircraft duly registered, and to
maintain, service, repair and overhaul the Aircraft so as to keep it in such
condition as necessary to maintain the airworthiness certificate for the
Aircraft in good standing at all times. (Indentures, Section 7.02(c) and (e))
American will agree not to maintain, use or operate any Aircraft in
violation of any law, rule or regulation of any government having jurisdiction
over such Aircraft, or in violation of any airworthiness certificate, license or
registration relating to such Aircraft, except to the extent American (or any
lessee) is contesting in good faith the validity or application of any such law,
rule or regulation in any manner that does not involve any material risk of
sale, forfeiture or loss of the Aircraft. (Indentures, Section 7.02(b))
American must make all alterations, modifications and additions to each
Airframe and Engine necessary to meet the applicable requirements of the Federal
Aviation Administration (the "FAA") or any other applicable governmental
authority of another jurisdiction in which the Aircraft may then be registered;
provided, however, that American (or any lessee) may in good faith contest the
validity or application of any such requirement in any manner that does not
involve a material risk of sale, forfeiture or loss of the Aircraft. American
(or any lessee) may add further parts and make other alterations, modifications
and additions to any Airframe or any Engine as American (or any lessee) may deem
desirable in the proper conduct of its business, including removal (without
replacement) of parts, so long as such alterations, modifications, additions or
removals do not materially diminish the value or utility of such Airframe or
Engine below its value or utility immediately prior to such alteration,
modification, addition or removal (assuming such Airframe or Engine was
maintained in accordance with the Indenture), except that the value (but not the
utility) of any Airframe or Engine may be reduced from time to time by the value
of any such parts which have been removed that American deems obsolete or no
longer suitable or appropriate for use on such Airframe or Engine. All parts
(with certain exceptions) incorporated or installed in or added to such Airframe
or Engine as a result of such alterations, modifications or additions will be
subject to the lien of the Indenture. American (or any lessee) is permitted to
remove (without replacement) parts that are in addition to, and not in
replacement of or substitution for, any part originally incorporated or
installed in or attached to an Airframe or Engine at the time of delivery
thereof to American, as well as any part that is not required to be incorporated
or installed in or attached to any Airframe or Engine pursuant to applicable
requirements of the FAA or other jurisdiction in which the Aircraft may then be
registered, or any part that can be removed without materially diminishing the
requisite value or utility of the Aircraft. (Indentures, Section 7.04(c))
Except as set forth above, American will be obligated to replace or cause
to be replaced all parts that are incorporated or installed in or attached to
any Airframe or any Engine and become worn out, lost, stolen, destroyed, seized,
confiscated, damaged beyond repair or permanently rendered unfit for use. Any
such replacement parts will become subject to the lien of the related Indenture
in lieu of the part replaced. (Indentures, Section 7.04(a))
Registration, Leasing and Possession
Although American has no current intention to do so, American will be
permitted to register an Aircraft in certain jurisdictions outside the United
States, subject to certain conditions specified in the related Indenture. These
conditions include a requirement that the laws of the new jurisdiction of
registration will give effect to the lien of and the security interest created
by the related Indenture in the applicable Aircraft. (Indentures, Section
7.02(e)) American also will be permitted, subject to certain limitations, to
lease any Aircraft to any United States certificated air carrier or to certain
foreign air carriers. In addition, subject to certain limitations, American will
be permitted to transfer possession of any
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Airframe or any Engine other than by lease, including transfers of possession by
American or any lessee in connection with certain interchange and pooling
arrangements, transfers to the government of Canada, France, Germany, Japan, the
Netherlands, Sweden, Switzerland, the United Kingdom or the United States or any
instrumentality or agency thereof, "wet leases" and transfers in connection with
maintenance or modifications. (Indentures, Section 7.02(a)) There will be no
general geographical restrictions on American's (or any lessee's) ability to
operate the Aircraft. The extent to which the relevant Loan Trustee's lien would
be recognized in an Aircraft if such Aircraft were located in certain countries
is uncertain. In addition, any exercise of the right to repossess an Aircraft
may be difficult, expensive and time-consuming, particularly when such Aircraft
is located outside the United States or has been registered in a foreign
jurisdiction or leased to a foreign operator, and may be subject to the
limitations and requirements of applicable law, including the need to obtain
consents or approvals for deregistration or re-export of the Aircraft, which may
be subject to delays and political risk. When a defaulting lessee or other
permitted transferee is the subject of a bankruptcy, insolvency or similar event
such as protective administration, additional limitations may apply. See "Risk
Factors -- Repossession".
In addition, at the time of foreclosing on the lien on the Aircraft under
the related Indenture, an Airframe subject to such Indenture might not be
equipped with Engines subject to the same Indenture. If American fails to
transfer title to engines not owned by American that are attached to repossessed
Aircraft, it could be difficult, expensive and time-consuming to assemble an
Aircraft consisting of an Airframe and Engines subject to the Indenture.
Liens
American is required to maintain each Aircraft free of any liens, other
than the rights of American, the lien of the Indenture, and any other rights
existing pursuant to the other operative documents and pass through documents
related thereto, the rights of others in possession of the Aircraft in
accordance with the terms of the Indenture and liens attributable to other
parties to the operative documents and pass through documents related thereto
and other than certain other specified liens, including but not limited to (i)
liens for taxes either not yet due or being contested in good faith by
appropriate proceedings so long as such proceedings do not involve any material
risk of the sale, forfeiture or loss of the Airframe or any Engine or the Loan
Trustee's interest therein; (ii) materialmen's, mechanics' and other similar
liens arising in the ordinary course of business and securing obligations that
either are not yet overdue for more than 60 days or are being contested in good
faith by appropriate proceedings so long as such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Airframe or any Engine or
the Loan Trustee's interest therein; (iii) judgment liens so long as such
judgment is discharged or vacated within 60 days or the execution of such
judgment is stayed pending appeal or such judgment is discharged, vacated or
reversed within 60 days after expiration of such stay; and (iv) any other lien
as to which American has provided a bond or other security adequate in the
reasonable opinion of the Loan Trustee. (Indentures, Section 7.01)
Insurance
Subject to certain exceptions, American is required to maintain, at its
expense (or at the expense of a lessee), all-risk aircraft hull insurance
covering each Aircraft, at all times in an amount not less than 110% of the
aggregate outstanding principal amount of the Equipment Notes relating to such
Aircraft. However, after giving effect to self-insurance permitted as described
below, the amount payable under such insurance may be less than such amounts
payable with respect to the Equipment Notes. If an Aircraft suffers an Event of
Loss, insurance proceeds up to an amount equal to the outstanding principal
amount of the Equipment Notes, together with accrued but unpaid interest
thereon, plus an amount equal to the interest that will accrue on the
outstanding principal amount of the Equipment Notes during the period commencing
on the date following the date of payment of such insurance proceeds to the Loan
Trustee and ending on the loss payment date (the "Loan Amount"), will be paid to
the applicable Loan Trustee. If an Aircraft or Engine suffers loss or damage not
constituting an Event of Loss but involving insurance proceeds in excess of
$8,000,000 (in the case of a Boeing 737-823), $15,000,000 (in the case of a
Boeing
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767-323ER) or $24,000,000 (in the case of a Boeing 777-223), proceeds in excess
of such specified amounts up to the Loan Amount will be payable to the
applicable Loan Trustee, and the proceeds up to such specified amounts and
proceeds in excess of the Loan Amount will be payable directly to American so
long as an Indenture Event of Default does not exist. So long as the loss does
not constitute an Event of Loss, insurance proceeds will be applied to repair or
replace the equipment. (Indentures, Section 7.06)
In addition, American is obligated to maintain aircraft liability insurance
at its expense (or at the expense of a lessee), including, without limitation,
bodily injury, personal injury and property damage liability insurance
(exclusive of manufacturer's product liability insurance) and contractual
liability insurance with respect to each Aircraft. Such liability insurance must
be underwritten by insurers of recognized responsibility. The amount of such
liability insurance coverage may not be less than the amount of aircraft
liability insurance from time to time applicable to similar aircraft in
American's fleet on which American carries insurance. (Indentures, Section 7.06)
American also is required to maintain war-risk insurance with respect to
each Aircraft if and to the extent such insurance is maintained by American (or
any lessee) with respect to other aircraft owned or operated by American (or
such lessee) on the same routes on which the Aircraft is operated. (Indentures,
Section 7.06)
American may self-insure under a program applicable to all aircraft in its
fleet, but the amount of such self-insurance in the aggregate may not exceed for
any 12-month policy year 1% of the average aggregate insurable value (during the
preceding policy year) of all aircraft on which American carries insurance,
unless an insurance broker of national standing certifies that the standard
among all other major U.S. airlines is a higher level of self-insurance, in
which case American may self-insure the Aircraft to such higher level. In
addition, American may self-insure to the extent of (i) any applicable
deductible per Aircraft that is not in excess of the amount customarily allowed
as a deductible in the industry or is required to facilitate claims handling, or
(ii) any applicable mandatory minimum per aircraft (or, if applicable, per annum
or other period) liability insurance or hull insurance deductibles imposed by
the aircraft liability or hull insurers. (Indentures, Section 7.06)
In respect of each Aircraft, American is required to name the relevant Loan
Trustee, each Trustee and the Liquidity Provider as additional insured parties
under the liability insurance policy required with respect to such Aircraft. In
addition, the hull and liability insurance policies will be required to provide
that, in respect of the interests of such additional insured party, the
insurance shall not be invalidated or impaired by any act or omission of
American. (Indentures, Section 7.06)
Events of Loss
If an Event of Loss occurs with respect to the Airframe or the Airframe and
one or more Engines of an Aircraft, American must elect within 90 days after
such occurrence either to make payment with respect to such Event of Loss or to
replace such Airframe and any such Engines. Depending upon American's election,
not later than the first Business Day after the 120th day following the date of
occurrence of such Event of Loss, American will either (i) redeem the Equipment
Notes under the applicable Indenture by paying to the Loan Trustee the
outstanding unpaid principal amount of such Equipment Notes, together with
accrued interest thereon, but without any Make-Whole Amount or (ii) substitute
an airframe (or airframe and one or more engines, as the case may be) for the
Airframe, or Airframe and Engine(s), that suffered such Event of Loss.
(Indentures, Sections 2.10 and 7.05(a)) See "-- Redemption".
If American elects to replace an Airframe (or Airframe and one or more
Engines, as the case may be) that suffered such Event of Loss, it will do so
with an airframe or airframe and engines of the same model as the Airframe or
Airframe and Engines to be replaced or a comparable or improved model, with a
value and utility at least equal to the Airframe or Airframe and Engines to be
replaced, assuming that such Airframe and such Engines were in the condition and
repair required by the related Indenture. American is also required to provide
to the relevant Loan Trustee opinions of counsel (i) to the effect that such
Loan Trustee will be entitled to the benefits of Section 1110 with respect to
the replacement airframe
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(unless, as a result of a change in law or governmental or judicial
interpretation, such benefits were not available to the Loan Trustee with
respect to the Aircraft immediately prior to such replacement), and (ii) as to
the due registration of the replacement aircraft and the due recordation of a
supplement to the Indenture relating to such replacement aircraft and the
validity and perfection of the security interest granted to the Loan Trustee in
the replacement aircraft. (Indentures, Section 7.05(a))
If American elects not to replace such Airframe, or Airframe and Engine(s),
then upon payment of the outstanding principal amount of the Equipment Notes
issued with respect to such Aircraft, together with accrued but unpaid interest
thereon, the lien of the Indenture relating to such Aircraft will terminate with
respect to such Aircraft, and the obligation of American thereafter to make the
scheduled interest and principal payments with respect thereto will cease. The
payments made under the Indenture by American will be deposited with the
applicable Loan Trustee. Amounts in excess of the amounts due and owing under
the Equipment Notes issued with respect to such Aircraft will be distributed by
such Loan Trustee to American. (Indentures, Sections 2.10, 3.02, 7.05(a) and
7.05(c))
If an Event of Loss occurs with respect to an Engine alone, American will
be required to replace such Engine within 120 days after the occurrence of such
Event of Loss with another engine, free and clear of all liens (other than
certain permitted liens). Such replacement engine will be the same model as the
Engine to be replaced, or a comparable or improved model of the same or another
manufacturer, suitable for installation and use on the Airframe, and will have a
value and utility at least equal to the Engine to be replaced, assuming that
such Engine was in the condition and repair required by the terms of the
relevant Indenture. (Indentures, Section 7.05(b))
An "Event of Loss" with respect to an Aircraft, Airframe or any Engine
means any of the following events with respect to such property:
- the destruction of such property, damage to such property beyond repair
or rendition of such property permanently unfit for normal use;
- any damage to such property that results in an insurance settlement with
respect to such property on the basis of a total loss or a compromised or
constructive total loss;
- any theft or disappearance of such property for a period exceeding 180
days;
- the requisition for use of such property by any government (other than
the government of Canada, France, Germany, Japan, The Netherlands,
Sweden, Switzerland, the United Kingdom or the United States or the
government of the country of registry of the Aircraft) that results in
the loss of possession of such property for a period exceeding 12
consecutive months;
- the operation or location of the Aircraft, while under requisition for
use by any government, in an area excluded from coverage by any insurance
policy required by the terms of the Indenture, unless American has
obtained indemnity or insurance in lieu thereof from such government;
- any requisition of title, capture, seizure, deprivation, confiscation or
detention (excluding requisition for use or hire not involving a
requisition of title) of the Aircraft by any government that results in
the loss of title or use of the Aircraft for a period in excess of 180
days;
- as a result of any law, rule, regulation, order or other action by the
FAA or other government of the country of registry, the use of the
Aircraft in the normal business of air transportation is prohibited by
virtue of a condition affecting all aircraft of the same type for a
period of 18 consecutive months, unless American is diligently carrying
forward all steps that are necessary or desirable to permit the normal
use of the Aircraft or, in any event, if such use is prohibited for a
period of three consecutive years; and
- with respect to any Engine, any divestiture of title to such Engine or,
in certain circumstances, the installation of such Engine on an airframe
that is subject to a conditional sale or other security agreement.
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An Event of Loss with respect to an Aircraft is deemed to have occurred if
an Event of Loss occurs with respect to the Airframe that is a part of such
Aircraft. (Indentures, Annex A)
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the principal federal income tax
consequences of the purchase, ownership and disposition of Certificates to a
Certificate Owner that purchases Certificates in the initial offering thereof at
the offering price set forth herein and holds such Certificates as capital
assets. The discussion is based on laws, regulations, rulings and decisions in
effect as of the date hereof, all of which are subject to change, possibly with
retroactive effect, or different interpretation. The discussion does not address
all of the federal income tax consequences that may be relevant to all
Certificate Owners in light of their particular circumstances (including, for
example, any special rules applicable to tax-exempt organizations,
broker-dealers and insurance companies). Except for the discussion below under
"--Certain Federal Income Tax Consequences to Foreign Certificateholders", this
discussion is addressed to beneficial owners of Certificates that are (i)
individual citizens or residents of the United States, (ii) corporations created
or organized in or under the laws of the United States, any state thereof or the
District of Columbia or (iii) partnerships, trusts or estates treated, for
federal income tax purposes, as domestic partnerships, trusts or estates ("U.S.
Persons"). The statements of law and legal conclusion set forth herein are based
upon the opinion of Debevoise & Plimpton, counsel to American. Persons
considering an investment in the Certificates should consult their own tax
advisors regarding the federal, state, local and any other tax consequences to
them of the purchase, ownership and disposition of Certificates in light of
their own particular circumstances. The Trusts, the Subordination Agent and the
Loan Trustee are not indemnified for any federal income taxes or with certain
exceptions other taxes that may be imposed upon them, and the imposition of any
such taxes could result in a reduction in the amounts available for distribution
to the Certificate Owners.
GENERAL
The Trusts will not be classified as associations (or publicly traded
partnerships)taxable as corporations and, accordingly, will not themselves be
subject to federal income taxation. Based upon an interpretation of analogous
authorities under existing law, each Trust should be classified as a grantor
trust for federal income tax purposes. The discussion below assumes that the
Trusts will be classified as grantor trusts.
Each Certificate Owner will be treated as the owner of a pro rata undivided
interest in each Equipment Note and any other property held in the related Trust
and will be required to report on its federal income tax return its pro rata
share of the entire income from each of the Equipment Notes and any other
property held in the related Trust, in accordance with such Certificate Owner's
method of accounting. A Certificate Owner using the cash method of accounting
must take into account its pro share of income as and when received by the
Trustee. A Certificate Owner using an accrual method of accounting must take
into account its pro rata share of income as it accrues or is received by the
Trustee, whichever is earlier.
A purchaser of a Certificate will be treated as purchasing an interest in
each Equipment Note and any other property in the related Trust at a price
determined by allocating the purchase price paid for the Certificate among such
Equipment Notes and other property in proportion to their fair market values at
the time of purchase of the Certificate.
SALES OF CERTIFICATES
A Certificate Owner that sells a Certificate will recognize capital gain or
loss (in the aggregate) equal to the difference between the amount realized on
the sale (except to the extent attributable to accrued interest, which will be
taxable as interest income if not previously included in income) and such
Certificate Owner's adjusted tax basis in the Certificate. Any such gain or loss
generally will be long-term capital gain or loss if the Certificate was held for
more than one year (except to the extent attributable to
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any property held by the related Trust for one year or less). Any long-term
capital gains with respect to the Certificates are taxable to corporate
taxpayers at the rates applicable to ordinary income and to individual taxpayers
at a maximum rate of 20%. Any capital losses will be deductible by corporate
taxpayers only to the extent of capital gains and by an individual taxpayer only
to the extent of capital gains plus $3,000 of other income.
EFFECT OF SUBORDINATION ON SUBORDINATED CERTIFICATE OWNERS
If any Trust is subordinated with respect to other Trusts and incurs a
shortfall in its receipts of principal or interest paid with respect to the
Equipment Notes held by it because of the subordination of the Equipment Notes
held by such Trust under the Intercreditor Agreement, the Certificate Owners of
Certificates in the subordinated Trust would probably be treated for federal
income tax purposes as if they had (i) received as distributions their full
share of such principal and interest, (ii) paid over to the relevant preferred
class of Certificate Owners an amount equal to their share of the amount of the
shortfall, and (iii) retained the right to reimbursement of such amount to the
extent of future amounts payable to such subordinated Certificate Owners with
respect to the shortfall.
Under this analysis, (i) subordinated Certificate Owners incurring a
shortfall would be required to include as current income any interest or other
income of the corresponding subordinated Trust that was a component of such
shortfall, even though such amount was in fact paid to the relevant preferred
class of Certificate Owners, (ii) a loss would be allowed to such subordinated
Certificate Owners when their right to receive reimbursement of such shortfall
became worthless (i.e., when it became clear that funds would not be available
from any source to reimburse such shortfall), and (iii) reimbursement of such
shortfall would not be taxable income to subordinated Certificate Owners because
the amount of such shortfall was previously included in income. These results
should not significantly affect the inclusion of income for subordinated
Certificate Owners on the accrual method of accounting, but could accelerate
inclusion of income for subordinated Certificate Owners on the cash method of
accounting by, in effect, placing them on the accrual method.
BOND PREMIUM
A Certificate Owner generally will be considered to have acquired an
interest in an Equipment Note held in the related Trust at a bond premium to the
extent such Certificate Owner's tax basis allocable to such Equipment Note
exceeds the remaining principal amount of the Equipment Note allocable to such
Certificate Owner's Certificate. In that event, a Certificate Owner may, in
certain circumstances, be able to amortize that bond premium (generally on a
constant yield basis) as an offset to interest income with corresponding
reductions in such Certificate Owner's tax basis in such Equipment Note. Special
rules apply to an Equipment Note that may be called at a redemption premium
prior to maturity. It is unclear how these rules apply to an Equipment Note when
there is more than one possible call date and the amount of any redemption
premium is uncertain. Certificate Owners should consult their own tax advisors
regarding the advisability and consequences of an election to amortize any bond
premium with respect to the Equipment Notes.
ORIGINAL ISSUE DISCOUNT
The Equipment Notes will not be issued with original issue discount unless
certain aggregation rules set forth in the Treasury regulations apply. Under
those rules, if one investor purchases Certificates issued by more than one
Trust, certain of that investor's interests in the Equipment Notes in those
Trusts must in certain circumstances be treated together as a single debt
instrument, which, for purposes of calculating and amortizing any original issue
discount, has a single issue price, maturity date, stated redemption price at
maturity and yield to maturity. If the aggregation rules apply to an investor,
such Equipment Notes could be treated with respect to such investor as having
been issued with original issue discount. Generally, a holder of a debt
instrument issued with original issue discount that is not de minimis must
include such original issue discount in income for federal income tax purposes
as it accrues, in advance of the receipt of
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the cash attributable to such income, under a method that takes into account the
compounding of interest. Certificate Owners should consult their own tax
advisors regarding the aggregation rules.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO FOREIGN CERTIFICATEHOLDERS
Subject to the discussion of backup withholding below, payments of
principal and interest on the Equipment Notes to, or on behalf of, any
beneficial owner of a Certificate that is not a U.S. Person (a "Non-U.S.
Certificateholder") will not be subject to U.S. federal withholding tax,
provided, in the case of interest, that (i) such Non-U.S. Certificateholder does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of American entitled to vote, (ii) such Non-U.S.
Certificateholder is not a controlled foreign corporation for U.S. tax purposes
that is related to American and (iii) either (A) the Non-U.S. Certificateholder
certifies, under penalties of perjury, that it is not a U.S. Person and provides
its name and address and certain other information or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and that holds the Certificate on behalf of the Non-U.S.
Certificateholder certifies, under penalties of perjury, that such a
certification and the Non-U.S. Certificateholder's name and address have been
received from the Non-U.S. Certificateholder by it or by another financial
institution and furnishes to the withholding agent the name and address of the
Non-U.S. Certificateholder and a copy of the Non-U.S. Certificateholder's
certification, provided that the U.S. Treasury Department has not published a
determination that a certification from such financial institution may not be
relied upon.
Any capital gain realized by a Non-U.S. Certificateholder upon the sale or
retirement of a Certificate or upon receipt of any Make-Whole Amount paid on an
Equipment Note will not be subject to U.S. federal income or withholding taxes
if (i) such gain is not effectively connected with a U.S. trade or business of
the Non-U.S. Certificateholder and (ii) in the case of an individual, such
Non-U.S. Certificateholder is not present in the United States for 183 days or
more in the taxable year of the sale, retirement or receipt.
Prospective investors that are not U.S. Persons should consult their own
tax advisors regarding the income and other tax consequences to them of the
purchase, ownership and disposition of the Certificates under U.S. federal,
state and local, and any other relevant law, in light of their own particular
circumstances.
BACKUP WITHHOLDING
Payments made on Certificates, and proceeds from the sale of Certificates
to or through certain brokers, may be subject to a "backup" withholding tax of
31% unless the Certificate Owner complies with certain reporting procedures or
is exempt from such requirements. Any such withheld amounts will be allowed as a
credit against the Certificate Owner's federal income tax and may entitle such
Certificate Owner to a refund if the required information is furnished to the
Internal Revenue Service. Certain penalties may be imposed by the Internal
Revenue Service on a Certificate Owner who is required to supply information but
who does not do so in the proper manner.
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CERTAIN CONNECTICUT TAXES
The Trustee is a national banking association with its corporate trust
office in Connecticut. Bingham Dana LLP, counsel to the Trustee, has advised
American that, in its opinion, under currently applicable law, assuming that
each Trust will not be taxable as a corporation for federal income tax purposes,
but, rather, will be classified for such purposes as a grantor trust or as a
partnership, (i) the Trusts will not be subject to any tax (including, without
limitation, net or gross income, tangible or intangible property, net worth,
capital, franchise or doing business tax), fee or other governmental charge
under the laws of the State of Connecticut or any political subdivision thereof
and (ii) Certificate Owners that are not residents of or otherwise subject to
tax in Connecticut will not be subject to any tax (including, without
limitation, net or gross income, tangible or intangible property, net worth,
capital, franchise or doing business tax), fee or other governmental charge
under the laws of the State of Connecticut or any political subdivision thereof
as a result of purchasing, owning (including receiving payments with respect to)
or selling a Certificate. Neither the Trusts nor the Certificate Owners will be
indemnified for any state or local taxes imposed on them, and the imposition of
any such taxes on a Trust could result in a reduction in the amounts available
for distribution to the Certificate Owners of such Trust. In general, should a
Certificate Owner or a Trust be subject to any state or local tax that would not
be imposed if the Trust were administered in a different jurisdiction in the
United States or if the Trustee were located in a different jurisdiction in the
United States, the Trustee will either relocate the administration of the Trust
to such other jurisdiction or resign and, in the event of such a resignation, a
new Trustee in such other jurisdiction will be appointed.
CERTAIN ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on employee benefit plans subject to Title I of
ERISA and on entities that are deemed to hold the assets of such plans ("ERISA
Plans"), and on those persons who are fiduciaries with respect to ERISA Plans.
Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including, but not limited to, the requirement of investment
prudence and diversification and the requirement that an ERISA Plan's
investments be made in accordance with the documents governing the Plan.
Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986,
as amended (the "Code"), prohibit certain transactions involving the assets of
an ERISA Plan (as well as those plans that are not subject to ERISA but which
are subject to Section 4975 of the Code, such as individual retirement accounts
(together with ERISA Plans, "Plans")) and certain persons (referred to as
"parties in interest" or "disqualified persons") having certain relationships to
such Plans, unless a statutory or administrative exemption is applicable to the
transaction. A party in interest or disqualified person who engages in a
prohibited transaction may be subject to excise taxes and other penalties and
liabilities under ERISA and the Code.
Any Plan fiduciary which proposes to cause a Plan to purchase Certificates
should consult with its counsel regarding the applicability of the fiduciary
responsibility and prohibited transaction provisions of ERISA and Section 4975
of the Code to such an investment, and to confirm that such purchase and holding
will not constitute or result in a non-exempt prohibited transaction or any
other violation of an applicable requirement of ERISA.
Governmental plans and certain church plans, while not subject to the
fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of ERISA and Section 4975 of the Code, may nevertheless be subject to
state or other federal laws or regulations that are substantially similar to the
foregoing provisions of ERISA and the Code. Fiduciaries of any such plans should
consult with their counsel before purchasing Certificates to determine the need
for, and the availability, if necessary, of any exemptive relief under any such
laws or regulations.
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PLAN ASSETS ISSUES
The Department of Labor has promulgated a regulation, 29 CFR Section
2510.3-101 (the "Plan Asset Regulation"), describing what constitutes the assets
of a Plan with respect to the Plan's investment in an entity for purposes of
ERISA and Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan
invests (directly or indirectly) in a Certificate, the Plan's assets will
include both the Certificate and an undivided interest in each of the underlying
assets of the corresponding Trust, including the Equipment Notes held by such
Trust, unless it is established that equity participation in the Trust by
benefit plan investors (including but not limited to Plans and entities whose
underlying assets include Plan assets by reason of an employee benefit plan's
investment in the entity) is not "significant" within the meaning of the Plan
Asset Regulation. In this regard, the extent to which there is equity
participation in a particular Trust by, or on behalf of, benefit plan investors
will not be monitored. If the assets of a Trust are deemed to constitute the
assets of a Plan, transactions involving the assets of such Trust could be
subject to the prohibited transaction provisions of ERISA and Section 4975 of
the Code unless a statutory or administrative exemption is applicable to the
transaction.
PROHIBITED TRANSACTION EXEMPTIONS
In addition, whether or not the assets of a Trust are deemed to be Plan
assets under the Plan Asset Regulation, the fiduciary of a Plan that proposes to
purchase and hold any Certificates should consider, among other things, whether
such purchase and holding may involve (i) the direct or indirect extension of
credit to a party in interest or a disqualified person, (ii) the sale or
exchange of any property between a Plan and a party in interest or a
disqualified person, or (iii) the transfer to, or use by or for the benefit of,
a party in interest or a disqualified person, of any Plan assets. Such parties
in interest or disqualified persons could include, without limitation, American
and its affiliates, the Underwriters, the Trustees and the Liquidity Provider.
Moreover, if Certificates are purchased by a Plan and Certificates of a
subordinate Class are held by a party in interest or a disqualified person with
respect to such Plan, the exercise by the holder of the subordinate Class of
Certificates of its right to purchase the senior Classes of Certificates upon
the occurrence and during the continuation of a Triggering Event could be
considered to constitute a prohibited transaction unless a statutory or
administrative exemption were applicable. Depending on the satisfaction of
certain conditions which may include the identity of the Plan fiduciary making
the decision to acquire or hold Certificates on behalf of a Plan, Prohibited
Transaction Class Exemption ("PTCE") 91-38 (relating to investments by bank
collective investment funds), PTCE 84-14 (relating to transactions effected by a
"qualified professional asset manager"), PTCE 95-60 (relating to investments by
an insurance company general account), PTCE 96-23 (relating to transactions
directed by an in-house asset manager) or PTCE 90-1 (relating to investments by
insurance company pooled separate accounts) (collectively, the "Class
Exemptions") could provide an exemption from the prohibited transaction
provisions of ERISA and Section 4975 of the Code. However, there can be no
assurance that any of these Class Exemptions or any other exemption will be
available with respect to any particular transaction involving the Certificates.
Each person who acquires or accepts a Certificate or an interest therein
will be deemed by such acquisition or acceptance to have represented and
warranted that either: (i) no assets of a Plan or any trust established with
respect to a Plan have been used to acquire such Certificate or an interest
therein or (ii) the purchase and holding of such Certificate or an interest
therein by such person are exempt from the prohibited transaction restrictions
of ERISA and the Code pursuant to one or more prohibited transaction statutory
or administrative exemptions.
SPECIAL CONSIDERATIONS APPLICABLE TO INSURANCE COMPANY GENERAL ACCOUNTS
It should be noted that the Small Business Job Protection Act of 1996 added
new Section 401(c) of ERISA relating to the status of the assets of insurance
company general accounts under ERISA and Section 4975 of the Code. Pursuant to
Section 401(c), the Department of Labor is required to issue final regulations
(the "General Account Regulations") with respect to insurance policies issued on
or before December 31, 1998 that are supported by an insurer's general account.
The General Account Regulations
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are to provide guidance on which assets held by the insurer constitute "plan
assets" for purposes of the fiduciary responsibility provisions of ERISA and
Section 4975 of the Code. Section 401(c) also provides that, except in the case
of avoidance of the General Account Regulations and actions brought by the
Secretary of Labor relating to certain breaches of fiduciary duties that also
constitute breaches of state or federal criminal law, until the date that is 18
months after the General Account Regulations become final, no liability under
the fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 of the Code may result on the basis of a claim that the assets of
the general account of an insurance company constitute the assets of any Plan.
The plan asset status of insurance company separate accounts is unaffected by
new Section 401(c) of ERISA, and separate account assets continue to be treated
as the assets of any Plan invested in a separate account, except to the extent
provided in the Plan Asset Regulation.
As of the date hereof, the Department of Labor has issued proposed
regulations under Section 401(c). If the General Account Regulations are adopted
substantially in the form in which proposed, the General Account Regulations may
not exempt the assets of insurance company general accounts from treatment as
"plan assets" after December 31, 1998. The proposed regulations should not,
however, adversely affect the applicability of PTCE 95-60 to purchases of
Certificates by insurance company general accounts.
EACH PLAN FIDUCIARY (AND EACH FIDUCIARY FOR A GOVERNMENTAL OR CHURCH PLAN
SUBJECT TO RULES SIMILAR TO THOSE IMPOSED ON PLANS UNDER ERISA) SHOULD CONSULT
WITH ITS LEGAL ADVISOR CONCERNING THE POTENTIAL CONSEQUENCES TO THE PLAN UNDER
ERISA, THE CODE OR SUCH SIMILAR LAWS OF AN INVESTMENT IN ANY OF THE
CERTIFICATES.
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UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1999 (the "Underwriting Agreement"), the
Underwriters named below (the "Underwriters") have severally but not jointly
agreed with American to purchase from the Trustee the following respective
principal amounts of Certificates.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS B CLASS C
UNDERWRITER CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Credit Suisse First Boston Corporation............ $ $ $ $
Morgan Stanley & Co. Incorporated.................
Goldman, Sachs & Co...............................
Merrill Lynch Pierce, Fenner & Smith,
Incorporated....................................
Salomon Smith Barney, Inc.........................
-------- -------- -------- --------
Total................................... $ $ $ $
======== ======== ======== ========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the Certificates if any are
purchased. The Underwriting Agreement provides that if an Underwriter defaults
the purchase commitments of non-defaulting Underwriters may be increased or the
offering of Certificates may be terminated. The Underwriters have advised
American that the Underwriters propose to offer all or part of the Certificates
directly to the public at the public offering prices set forth on the cover page
of this Prospectus Supplement and to certain selling group members at such
prices less concessions not in excess of the amounts for each respective Class
set forth below. The Underwriters and selling group members may allow discounts
not in excess of the amounts for each respective Class set forth below on sales
to other broker/dealers. After the initial public offering, the public offering
prices and concessions and discounts may be changed.
<TABLE>
<CAPTION>
PASS THROUGH CONCESSION REALLOWANCE
CERTIFICATE DESIGNATION TO DEALERS CONCESSION
- ----------------------- ---------- -----------
<S> <C> <C>
1999-1A-1................................................... % %
1999-1A-2...................................................
1999-1B.....................................................
1999-1C.....................................................
</TABLE>
The aggregate proceeds from the sale of the Certificates will be
$ . American will pay the Underwriters a commission of $ .
American estimates that its out of pocket expenses for the offering will be
approximately $ .
The Certificates are a new issue of securities with no established trading
market. American does not intend to apply for the listing of the Certificates on
a national securities exchange, but has been advised by the Underwriters that
they presently intend to make a market in the Certificates, as permitted by
applicable laws and regulations. No Underwriter is obligated, however, to make a
market in the Certificates, and any such market-making may be discontinued at
any time, at the sole discretion of such Underwriter. Accordingly, no assurance
can be given as to the liquidity of, or trading markets for, the Certificates.
American has agreed to reimburse the Underwriters for certain expenses and
has agreed to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, or contribute to
payments which the Underwriters may be required to make in respect thereof.
From time to time, several of the Underwriters or their affiliates perform
investment banking and advisory services for, and provide general financing and
banking services to, American and its affiliates. Credit Suisse First Boston,
New York branch has advanced loans to American in an amount not
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greater than $170,000,000 that are secured by certain of the Aircraft. American
will repay such loans concurrently with the closing of the offering of the
Certificates. Aside from stated interest on such loans, Credit Suisse First
Boston, New York branch has not received any fees in connection with such loans.
It is expected that delivery of the Certificates will be made against
payment therefor on or about the date specified in the second to the last
paragraph of the cover page of this Prospectus Supplement, which will be the
business day following the date of pricing of the Certificates (such
settlement cycle being referred to herein as "T+ "). Under Rule 15c6-1 of the
Commission under the Securities Exchange Act of 1934, as amended, trades in the
secondary market generally are required to settle in three business days, unless
the parties to any such trade expressly agree otherwise. Accordingly, purchasers
who wish to trade Certificates on the date of pricing or the next
succeeding business days will be required, by virtue of the fact that the
Certificates initially will settle in T+ , to specify an alternate settlement
cycle at the time of any such trade to prevent a failed settlement. Purchasers
of Certificates who wish to trade Certificates on the date of pricing or the
next succeeding business days should consult their own advisor.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934, as amended.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the Certificates in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the Underwriters to reclaim a selling concession from
a syndicate member when the Certificates originally sold by such
syndicate member are purchased in a stabilizing transaction or a
syndicate covering transaction to cover syndicate short positions.
Such stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the Certificates to be higher than it would otherwise be
in the absence of such transactions. These transactions, if commenced, may be
discontinued at any time.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Certificates in Canada is being made only on a
private placement basis exempt from the requirement that American prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of Certificates are effected. Accordingly, any resale of the
Certificates in Canada must be made in accordance with applicable securities
laws which will vary depending on the relevant jurisdiction, and which may
require resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the Certificates.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Certificates in Canada who receives a purchase
confirmation will be deemed to represent to American and the dealer from whom
such purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Certificates without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such
S-61
<PAGE> 62
purchaser is purchasing as principal and not as agent, and (iii) such purchaser
has reviewed the text above under "Resale Restrictions".
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission of rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgement obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Certificates to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Certificates acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from American. Only one such
report must be filed in respect of Certificates acquired on the same date and
under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Certificates should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the
Certificates in their particular circumstances and with respect to the
eligibility of the Certificates for investment by the purchaser under relevant
Canadian legislation.
LEGAL OPINIONS
The validity of the Certificates is being passed upon for American by
Debevoise & Plimpton, New York, New York, and for the Underwriters by Shearman &
Sterling, New York, New York. The respective counsel for American and the
Underwriters will rely upon Bingham Dana LLP, Hartford, Connecticut, counsel to
State Street Bank and Trust Company of Connecticut, National Association, as to
certain matters relating to the authorization, execution and delivery of the
Basic Agreement, each Trust Supplement and the Certificates, and the valid and
binding effect thereof, and on the opinion of Anne H. McNamara, Esq., Senior
Vice President and General Counsel of American, as to certain matters relating
to the authorization, execution and delivery of the Basic Agreement and each
Trust Supplement by American.
S-62
<PAGE> 63
EXPERTS
Ernst & Young LLP, independent auditors, have audited American's
consolidated financial statements and schedule included in American's Annual
Report (Form 10-K) for the year ended December 31, 1998, as set forth in their
reports, which are incorporated by reference in the Prospectus accompanying this
Prospectus Supplement. Such consolidated financial statements and schedule are
incorporated therein by reference in reliance on Ernst & Young LLP's reports,
given upon their authority as experts in accounting and auditing.
The references to AISI, AvSolutions and MBA, and to their respective
appraisal reports, are included herein in reliance upon the authority of each
such firm as an expert with respect to the matters contained in its appraisal
report.
S-63
<PAGE> 64
APPENDIX I
INDEX OF TERMS
The following is an index showing the page in this Prospectus Supplement
where certain defined terms appear.
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C>
Adjusted Expected Distributions...... S-40
Aggregate LTV Collateral Amount...... S-40
Aircraft............................. S-42
AISI................................. S-42
Appraised Current Market Value....... S-41
Appraisers........................... S-42
Assumed Aircraft Value............... S-45
Average Life Date.................... S-45
AvSolutions.......................... S-42
Bankruptcy Code...................... S-26
Base Rate............................ S-34
Basic Agreement...................... S-18
Business Day......................... S-21
Cash Collateral Account.............. S-32
Cede................................. S-30
Certificate Account.................. S-21
Certificate Owner.................... S-30
Certificateholders................... S-19
Certificates......................... S-18
Class A-1 Certificateholders......... S-19
Class A-2 Certificateholders......... S-19
Class A-1 Certificates............... S-19
Class A-2 Certificates............... S-19
Class A-1 Trust...................... S-18
Class A-2 Trust...................... S-18
Class A-1 Trustee.................... S-19
Class A-2 Trustee.................... S-19
Class B Certificateholders........... S-19
Class B Certificates................. S-19
Class B Trust........................ S-18
Class B Trustee...................... S-19
Class C Certificateholders........... S-19
Class C Certificates................. S-19
Class C Trust........................ S-18
Class C Trustee...................... S-19
Class D Certificates................. S-29
Class D Trust........................ S-29
Class D Trustee...................... S-29
Class Exemptions..................... S-58
Code................................. S-57
Commission........................... S-18
Controlling Party.................... S-36
Current Distribution Date............ S-38
date of determination................ S-45
disqualified persons................. S-57
Distribution Date.................... S-20
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C>
Downgrade Drawing.................... S-32
Drawing.............................. S-34
DTC.................................. S-30
DTC Participants..................... S-30
Equipment............................ S-48
Equipment Notes...................... S-43
ERISA................................ S-57
ERISA Plans.......................... S-57
Event of Loss........................ S-53
Expected Distributions............... S-38
FAA.................................. S-50
Final Distributions.................. S-37
Final Drawing........................ S-34
Final Legal Distribution Date........ S-20
General Account Regulations.......... S-58
H.15(519)............................ S-45
Indirect Participants................ S-30
Indenture Events of Default.......... S-46
Indenture............................ S-43
Intercreditor Agreement.............. S-36
Interest Drawings.................... S-31
LIBOR................................ S-34
Liquidity Event of Default........... S-35
Liquidity Expenses................... S-38
Liquidity Facility................... S-31
Liquidity Obligations................ S-38
Liquidity Provider................... S-31
Loan Amount.......................... S-51
Loan Trustee......................... S-43
LTV Appraisal........................ S-41
LTV Collateral Amount................ S-40
LTV Ratio............................ S-41
LTVs................................. S-7
Make-Whole Amount.................... S-45
Maximum Available Commitment......... S-31
MBA.................................. S-42
Minimum Sale Price................... S-37
Moody's.............................. S-17
most recent H.15(519)................ S-45
Non-Extension Drawing................ S-33
Non-Performing Equipment Notes....... S-40
Non-U.S. Certificateholder........... S-56
Note Holder.......................... S-25
Participation Agreement.............. S-43
parties in interest.................. S-57
Pass Through Trust Agreements........ S-18
</TABLE>
I-1
<PAGE> 65
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C>
Performing Equipment Note............ S-32
Permitted Investments................ S-24
Plan Asset Regulation................ S-58
Plans................................ S-57
Pool Balance......................... S-21
Pool Factor.......................... S-21
Prospectus........................... S-18
PTC Event of Default................. S-25
PTCE................................. S-58
Rating Agencies...................... S-17
Regular Distribution Dates........... S-20
Remaining Weighted Average Life...... S-45
Replacement Facility................. S-32
Required Amount...................... S-31
Scheduled Payments................... S-20
Section 1110......................... S-48
Section 1110 Period.................. S-32
Series A-1 Equipment Notes........... S-43
Series A-2 Equipment Notes........... S-43
Series B Equipment Notes............. S-43
Series C Equipment Notes............. S-43
</TABLE>
<TABLE>
<CAPTION>
DEFINED TERM PAGE
- ------------ ----
<S> <C>
Series D Equipment Notes............. S-43
Special Distribution Date............ S-20
Special Payment...................... S-20
Special Payments Account............. S-21
Standard & Poor's.................... S-17
Stated Interest Rates................ S-31
Subordination Agent.................. S-36
Termination Notice................... S-35
Threshold Rating..................... S-33
Transportation Code.................. S-26
Treasury Yield....................... S-45
Triggering Event..................... S-37
Trust Indenture Act.................. S-27
Trust Property....................... S-19
Trust Supplement..................... S-18
Trustees............................. S-19
Trusts............................... S-18
U.S. Government Obligations.......... S-46
U.S. Persons......................... S-54
Underwriters......................... S-60
Underwriting Agreement............... S-60
</TABLE>
I-2
<PAGE> 66
APPENDIX II
APPRAISAL LETTERS
II-1
<PAGE> 67
[AIRCRAFT INFORMATION SERVICES, INC. LETTERHEAD]
13 August 1999
Mr. David Holtschlag, Principal
American Airlines, Inc.
4333 Amon Carter Boulevard
Mail Drop 5662
Fort Worth, TX 76155
Subject: AISI Report No. A9S022BVO; AISI Sight Unseen Base Value Appraisal,
Ten B737-823, Three B767-323ER and Two B777-223IGW Aircraft.
Reference: (a) Morgan Stanley Dean Witter Memorandum, 10 August 1999
(b) Morgan Stanley Dean Witter Facsimile Message, 10 August 1999
Dear Mr. Holtschlag:
Aircraft Information Services, Inc. (AISI) is pleased to offer American
Airlines, Inc. our opinion of the sight unseen base market value of various new
and delivered aircraft as listed and defined in references (a) and (b) and Table
I herein.
1. METHODOLOGY AND DEFINITIONS
The method used by AISI in its valuation of the Aircraft was based both on a
review of information and Aircraft specifications supplied by the client or
client's representative and also on a review of present and past market
conditions, various expert opinions (such as aircraft brokers and financiers)
and information contained in AISI's databases that help determine aircraft
availability and price data and thus arrive at the appraised base values for the
new aircraft to be delivered to American Airlines, Inc.
The standard terms of reference for commercial aircraft value are 'half-life
base market value' and 'half-life current market value' of an 'average'
aircraft. Base value is a theoretical value that assumes a balanced market while
current market value is the value in the real market; both assume a hypothetical
average aircraft condition. AISI value definitions are consistent with the
current definitions of the International Society of Transport Aircraft Trading
(ISTAT). AISI is a member of that organization and employs an ISTAT Certified
and Senior Certified Aircraft Appraiser.
<PAGE> 68
[LOGO]
13 August 1999
AISI File No. A9S022BVO
Page - 2 -
AISI defines a 'base value' as that of a transaction between equally willing and
informed buyer and seller, neither under compulsion to buy or sell, for a single
unit cash transaction with no hidden value or liability, and with supply and
demand of the sale item roughly in balance. Base values are typically given for
aircraft in 'new' condition, 'average half-life' condition, or in a specifically
described condition unique to a single aircraft at a specific time. An 'average'
aircraft is an operable airworthy aircraft in average physical condition and
with average accumulated flight hours and cycles, with clear title and standard
unrestricted certificate of airworthiness, and registered in an authority which
does not represent a penalty to aircraft value or liquidity, with no damage
history and with inventory configuration and level of modification which is
normal for its intended use and age. AISI assumes average condition unless
otherwise specified in this report. 'Half-life' condition assumes that every
component or maintenance service which has a prescribed interval that determines
its service life, overhaul interval or interval between maintenance services, is
at a condition which is one-half of the total interval. It should be noted that
AISI and ISTAT value definitions apply to a transaction involving a single
aircraft, and that transactions involving more than one aircraft are often
executed at considerable and highly variable discounts to a single aircraft
price, for a variety of reasons relating to an individual buyer or seller.
AISI defines a 'current market value', which is synonymous with the older term
'fair market value' as that value which reflects the real market conditions,
whether at, above or below the base value conditions. Assumption of a single
unit sale and definitions of aircraft condition, buyer/seller qualifications and
type of transaction remain unchanged from that of base value. Current market
value takes into consideration the status of the economy in which the aircraft
is used, the status of supply and demand for the particular aircraft type, the
value of recent transactions and the opinions of informed buyers and sellers.
Current market value assumes that there is no short term time constraint to buy
or sell.
AISI encourages the use of base values to consider historical trends, to
establish a consistent baseline for long term value comparisons and future value
considerations, or to consider how actual market values vary from theoretical
base values. Base values are less volatile than current market values and tend
to diminish regularly with time. Base values are normally inappropriate to
determine near term values. AISI encourages the use of current market values to
consider the probable near term value of an aircraft.
2. VALUATION
Following is AISI's opinion of base market value for the subject aircraft on
their respective scheduled delivery dates or as of their utilization on 03
August 1999, in 1999 US Dollars. Valuations are presented in Table I subject to
assumptions, definitions and disclaimers herein.
<PAGE> 69
[LOGO]
13 August 1999
AISI File No. A9S022BVO
Page - 3 -
Unless otherwise agreed by Aircraft Information Services, Inc. (AISI) in
writing, this report shall be for the sole use of the client/addressee. This
report is offered as a fair and unbiased assessment of the subject aircraft.
AISI has no past, present, or anticipated future interest in the subject
aircraft. The conclusions and opinions expressed in this report are based on
published information, information provided by others, reasonable
interpretations and calculations thereof and are given in good faith. Such
conclusions and opinions are judgments that reflect conditions and values which
are current at the time of this report. The values and conditions reported upon
are subject to any subsequent change. AISI shall not be liable to any party for
damages arising out of reliance or alleged reliance on this report, or for any
parties action or failure to act as a result of reliance or alleged reliance on
this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
/s/ FRED BEARDEN
Fred Bearden
President
<PAGE> 70
[LOGO]
TABLE 1
American Airlines Fleet
A9S022BVO, 13 August 1999
Base Market Values in 1999 US Dollars
<TABLE>
<CAPTION>
Tot. Hrs. Tot. Cyc. Adjusted BV
Number Type Del'y Date Serial No. Reg'n. No. at 8/3/99 at 8/3/99 1999 USD
- ------ ---- ---------- ---------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 B737-823 5/13/99 29510 N908AN 683 211 47,630,000
2 B737-823 5/19/99 29511 N909AN 652 214 47,640,000
3 B737-823 5/26/99 29512 N910AN 612 208 47,640,000
4 B737-823 6/25/99 29513 N912AN 325 107 47,700,000
5 B737-823 7/19/99 29515 N914AN 116 37 47,740,000
6 B737-823 7/28/99 29516 N915AN 34 17 47,750,000
7 B737-823 8/5/99 29517 N916AN NA NA 47,760,000
8 B737-823 8/27/99 29518 N917AN NA NA 47,760,000
9 B737-823 9/10/99 29519 N918AN NA NA 47,760,000
10 B737-823 9/15/99 29520 N919AN NA NA 47,760,000
11 B767-323ER 6/13/98 29431 N394AN 5226 824 86,310,000
12 B767-323ER 4/30/99 29605 N398AN 1039 164 90,360,000
13 B767-323ER 5/28/99 29606 N399AN 456 75 90,480,000
14 B777-223IGW 6/21/99 29587 N778AN 485 61 133,240,000
15 B777-223IGW 6/27/99 29955 N779AN 398 59 133,270,000
</TABLE>
<PAGE> 71
[AvSOLUTIONS, INC. LETTERHEAD]
August 13, 1999
Mr. David Holtschlag, Principal
American Airlines, Inc.
4333 Amon Carter Boulevard
Mail Drop 5662
Fort Worth, Texas 76155
Dear Mr. Holtschlag:
AvSOLUTIONS is pleased to provide this opinion on the base value, as
of August 1999, of ten Boeing 737-800, three Boeing 767-300ER and two Boeing
777-200 IGW aircraft (the aircraft). The Boeing 737-800 aircraft are powered by
CFM International CFM56-7B26 engines. The Boeing 767-300ER aircraft are powered
by General Electric CF6-8OC2B6 engines. The Boeing 777-200 IGW aircraft are
powered by Rolls-Royce Trent 892 engines. The total of fifteen aircraft either
have already been delivered or will be delivered new to American Airlines, Inc.
from the second quarter of 1998 through the third quarter of 1999. A listing of
the particular aircraft is provided as attachment 1 of this document.
Set forth below is a summary of the methodology, considerations and
assumptions utilized in this appraisal.
BASE VALUE
Base value is the appraiser's opinion of the underlying economic value
of an aircraft in an open, unrestricted, stable market environment with a
reasonable balance of supply and demand, and assumes full consideration of its
"highest and best use". An aircraft's base value is founded in the historical
trend of values and in the projection of future value trends and presumes an
arm's length, cash transaction between willing, able and knowledge parties,
acting prudently, with an absence of duress and with a reasonable period of time
available for marketing.
CURRENT FAIR MARKET VALUE
According to the International Society of Transport Aircraft Trading's
(ISTAT) definition of Fair Market Value (FMV), to which AvSOLUTIONS subscribes,
the quoted FMV is the appraiser's opinion of the most likely trading price that
may be generated for an aircraft under the market circumstances that are
perceived to exist at the time in question. The fair market value assumes that
the aircraft is valued for its highest and best use, that the parties to the
hypothetical sales transaction are willing, able, prudent and knowledgeable, and
under no unusual pressure for a prompt sale, and that the transaction would be
negotiated in an open and unrestricted market on an arm's length basis, for cash
equivalent consideration, and given an adequate amount of time for effective
market exposure to prospective buyers, which AvSOLUTIONS considers to be ten to
twenty months.
<PAGE> 72
AvSOLUTIONS
- --------------------------------------------------------------------------------
Page 2
American Airlines, Inc.
APPRAISAL METHODOLOGY
The method employed by AvSOLUTIONS to appraise the current and future
values of aircraft and the associated equipment addresses the factors that
influence the market value of an aircraft, such as its age, condition,
configuration, the population of similar aircraft, similar aircraft on the
market, operating costs, cost to acquire a new aircraft, and the state of demand
for transportation services.
To achieve this objective, cross-sectional data concerning the values
of aircraft in each of several general categories is collected and analyzed.
Cross-sectional data is then postulated and compared with reported market values
at a specified point in time. Such data reflects the effect of deterioration in
aircraft performance due to usage and exposure to the elements, as well as the
effect of obsolescence due to the evolutionary development and implementation of
new designs and materials.
The product of the analysis identifies the relationship between the
value of each aircraft and its characteristics, such as age, model designation,
service configuration and engine type. Once the relationship is identified, one
can then postulate the effects of the difference between the economic
circumstances at the time when the cross-sectional data were collected and the
current situation. Therefore, if one can determine the current value of an
aircraft in one category, it is possible to estimate the current values of all
aircraft in that category.
The manufacturer and size of the aircraft usually determine the
specific category to which it is assigned. Segregating the world airplane fleet
in this manner accommodates the potential effects of different size and
different design philosophies.
The variability of the data used by AvSOLUTIONS to determine the
current and future market values implies that the actual value realized will
fall within a range of values. Therefore, if a contemplated value falls within
the specified confidence range, AvSOLUTIONS cannot reject the hypothesis that it
is a reasonable representation of the current market situation.
LIMITING CONDITIONS AND ASSUMPTIONS
In order to conduct this valuation, AvSOLUTIONS is solely relying on
information as supplied by American Airlines, Inc. and from data within
AvSOLUTIONS' own database. In determining the base value of the subject
aircraft, the following assumptions have been researched and determined:
<PAGE> 73
AvSOLUTIONS
- --------------------------------------------------------------------------------
Page 3
American Airlines, Inc.
1. AvSOLUTIONS has not inspected these aircraft or their maintenance records;
accordingly, AvSOLUTIONS cannot attest to their specific location or condition.
2. The aircraft either have already been delivered or will be delivered new to
American Airlines, Inc. between the second quarter of 1998 and the third quarter
of 1999.
3. The aircraft will be certified, maintained and operated under United States
Federal Aviation Regulation (FAR) part 121.
4. All mandatory inspections and Airworthiness Directives have been complied
with.
5. The aircraft have no damage history.
6. The aircraft are in good condition.
7. AvSOLUTIONS considers the economic useful life of these aircraft to be at
least 32 years.
Based upon the above methodology, considerations and assumptions, it is
AvSOLUTIONS' opinion that the base value of each aircraft is as listed in
attachment 1.
<PAGE> 74
AvSOLUTIONS
- --------------------------------------------------------------------------------
Page 4
American Airlines, Inc.
STATEMENT OF INDEPENDENCE
This appraisal report represents the opinion of AvSOLUTIONS, and is
intended to be advisory in nature. Therefore, AvSOLUTIONS assumes no
responsibility or legal liability for actions taken or not taken by the Client
or any other party with regard to the subject aircraft. By accepting this
report, the Client agrees that AvSOLUTIONS shall bear no responsibility or legal
liability regarding this report. Further, this report is prepared for the
exclusive use of the Client and shall not be provided to other parties without
the Client's express consent.
Aviation Solutions Inc. (AvSOLUTIONS) hereby states that this valuation
report has been independently prepared and fairly represents the subject
aircraft and AvSOLUTIONS' opinion of their values. Aviation Solutions Inc.
(AvSOLUTIONS) further states that it has no present or contemplated future
interest or association with the subject aircraft.
Signed,
/s/ BRYANT LYNCH
Bryant Lynch
Manager, Commercial Appraisals
<PAGE> 75
AvSOLUTIONS
- --------------------------------------------------------------------------------
ATTACHMENT I
EETC COLLATERAL SUMMARY
<TABLE>
<CAPTION>
AIRCRAFT TAIL DELIVERY SERIAL MTOW
NUMBER AIRCRAFT NUMBER MO/YR ENGINES NUMBER (POUNDS) BASE VALUE
- ------- -------- ------ -------- ------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Boeing 737-800 N908AN May-99 CFM56-7B26 29510 174,200 $46,950,000
2 Boeing 737-800 N909AN May-99 CFM56-7B26 29511 174,200 $46,950,000
3 Boeing 737-800 N910AN May-99 CFM56-7B26 29512 174,200 $46,950,000
4 Boeing 737-800 N912AN Jun-99 CFM56-7B26 29513 174,200 $46,950,000
5 Boeing 737-800 N914AN Jul-99 CFM56-7B26 29515 174,200 $47,243,000
6 Boeing 737-800 N915AN Jul-99 CFM56-7B26 29516 174,200 $47,243,000
7 Boeing 737-800 N916AN Aug-99 CFM56-7B26 29517 174,200 $47,243,000
8 Boeing 737-800 N917AN Aug-99 CFM56-7B26 29518 174,200 $47,243,000
9 Boeing 737-800 N918AN Sep-99 CFM56-7B26 29519 174,200 $47,243,000
10 Boeing 737-800 N919AN Sep-99 CFM56-7B26 29520 174,20O $47,243,000
</TABLE>
<TABLE>
<CAPTION>
AIRCRAFT TAIL DELIVERY SERIAL MTOW
NUMBER AIRCRAFT NUMBER MO/YR ENGINES NUMBER (POUNDS) BASE VALUE
- ------- -------- ------ -------- ------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
11 Boeing 767-300ER N394AN Jun-98 CF6-8OC2B6 29431 408,000 $86,510,000
12 Boeing 767-300ER N398AN Apr-99 CF6-8OC2B6 29605 408,000 $90,430,000
13 Boeing 767-300ER N399AN May-99 CF6-8OC2B6 29606 408,000 $90,430,000
</TABLE>
<TABLE>
<CAPTION>
AIRCRAFT TAIL DELIVERY SERIAL MTOW
NUMBER AIRCRAFT NUMBER MO/YR ENGINES NUMBER (POUNDS) BASE VALUE
- ------- -------- ------ -------- ------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
14 Boeing 777-200IGW N778AN Jun-99 Trent 892 29587 648,000 $132,930,000
15 Boeing 777-200IGW N779AN Jun-99 Trent 892 29955 648,000 $132,930,000
</TABLE>
<PAGE> 76
MORTON BEYER & AGNEW
--------------------
AVIATION CONSULTING FIRM
Appraisal of 15 Aircraft (EETC)
PREPARED FOR:
American Airlines
AUGUST 24, 1999
Washington, D.C. London
8180 Greensboro Drive Lahinch 62, Lashmere
Suite 1000 Copthorne
McLean, Virginia 22102 West Sussex
Phone +703 847 6598 Phone +44 1342 716248
Fax +703 847 1911 Fax +44 1342 718967
[MBA LOGO]
<PAGE> 77
- --------------------------------------------------------------------------------
I. INTRODUCTION AND EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
MORTEN BEYER & AGNEW, INC. (MBA), has been retained by American Airlines to
determine the Current Base Value of 15 passenger aircraft delivered new. The
aircraft are further identified in Section II of this report.
Based on the information set forth further in this report, it is our opinion
that the Current Base Value of this portfolio is $971,200,000 as noted in
Section IV.
MBA uses the definition of certain terms, such as Current Market Value and Base
Value, as promulgated by the Appraisal Program of International Society of
Transport Aircraft Trading (ISTAT), a non-profit association of management
personnel from banks, leasing companies, airlines, manufacturers, brokers, and
others who have a vested interest in the commercial aviation industry and who
have established a technical and ethical certification program for expert
appraisers.
ISTAT defines Current Market Value (CMV) as the appraiser's opinion of the most
likely trading price that may be generated for an aircraft under market
conditions that are perceived to exist at the time in question. Current Market
Value assumes that the aircraft is valued for its highest, best use; that the
parties to the hypothetical sale transaction are willing, able, prudent and
knowledgeable and under no unusual pressure for a prompt sale; and that the
transaction would be negotiated in an open and unrestricted market on an
arm's-length basis, for cash or equivalent consideration, and given an adequate
amount of time for effective exposure to prospective buyers.
The ISTAT definition of Base Value (BV) has, essentially, the same elements of
Market Value except that the market circumstances are assumed to be in a
reasonable state of equilibrium. Thus, Base Value pertains to an idealized
aircraft and market combination, but will not necessarily reflect the actual
Current Market Value of the aircraft in question. BV is founded in the
historical trend of values and is generally used to analyze historical values
or to project future values.
1
[MBA LOGO]
<PAGE> 78
<TABLE>
----------------------------------------------------------------------
II. Aircraft
----------------------------------------------------------------------
American Airlines
Serial
Model Number Tail Number Engine Type Date of Mfr. MTOW
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
B737-823 29510 N908AN CFM56-7B28 5/99 174,200
29511 N909AN 5/99
29512 N910AN 5/99
29513 N912AN 6/99
29515 N914AN 7/99
29516 N915AN 7/99
29517 N916AN 8/99
29518 N917AN 8/99
29519 N918AN 9/99
29520 N919AN 9/99
B767-323ER 29431 N394AN CF6-80C2B86 6/98 408,000
29605 N398AN 4/99
29606 N399AN 5/99
B777-223IGW 29587 N778AN TRENT 892 6/99 648,000
29955 N779AN 6/99
</TABLE>
Boeing 737-800 Boeing 737-300 Boeing 777-200
[PHOTO] [PHOTO] [PHOTO]
[MBA LOGO]
<PAGE> 79
- -------------------------------------------------------------------------------
III. CURRENT MARKET CONDITIONS
- -------------------------------------------------------------------------------
[PHOTO]
Boeing 737-800
Between 1984 and 1999, Boeing launched no fewer than seven new versions of the
B-737 Classic. The models vary in size from the -500/-600 series, which retain
the 130 seat maximum capacity of the -200, plus the large -300s, -400s, -700s,
- -800s, and -900s, which have up to 189 seats. Initially the -300/-400s were
Boeing's answer to the MD-80s, and the later -700/-800/-900s were designed in
response to the inroads of the new technology Airbus A320 series.
Almost 2,000 of the -300/-400/-500 series were built between 1984 and 1999, and
only 15 more remain on order. The New Generation series -600/-700/-800/-900s
entered service in 1997, and already 1,200 have been ordered. The series
features design refinements and new, quieter, and more efficient engines
permitting the further stretch of the -800 and -900 models. Higher gross weight
has also permitted transcontinental operations with the "NG" models.
The market for the NG B-737 has been strong, and production has been ramped up
to 21 aircraft per month. New orders are slowing, however, with 91 of all NG
models ordered in the last six months compared to 188 in the similar period last
year. Boeing has made efforts to hold prices of these aircraft down through new
manufacturing techniques.
As of June there were 24 B-737-300s, 12 -400s, and 1 -500 on the market for sale
or lease. Only a handful of the NG series -600/-700/-800 are available,
consisting of 0 -600s, 2 -700s and 0 -800s.
[PHOTO]
Boeing 767-300ER
The initial -200s entered service in 1982, with the first ER's joining them in
1984, being steadily upgraded until the early 90's when production effectively
ceased. The B-767-200, with its short body and 7-across seating is hard to make
money with. In 1986 the domestic stretched B-767-300 entered service, soon
[MBA LOGO]
3
<PAGE> 80
followed by the ER model, now able to take advantage of relaxed ETOPS
regulations. With almost 600 B767s of all models in service, the aircraft has
superceded most DC-10-30s and L-1011s in international service with front line
carriers.
In 1996 Boeing opted to build a stretched 767, the -400ER model, to satisfy the
needs of Delta who felt the B-777 was too big. There are now only 45
B-767-300ERs on order, plus 54 of the new -400ERs. There are currently 4
B-767-200ERs and 14-300ERs on the market as the aircraft continue to be popular
with lenders and operators alike.
------------------
[PHOTO] Boeing 777-200
------------------
The B-777 has gone through several name changes like 777-200/-200IGW and -200A/
- -200B as higher gross weight models were developed. It is now offered as the
- -200, the 200ER and the -300. Most orders are for the 200ER model. The aircraft
took, a bit of a hit when Asian carriers cancelled and delayed a number of
orders, but Boeing has re-arranged the deck chairs and now shows 188 -200/200ERs
and 23 -300s on order.
With 227 B-777s in service by 28 operators, Boeing has a healthy lead over its
A330/340 rivals - but orders have been languishing due to the Asian crisis and
Delta's cancellation of 11 due to pilot problems. Not to mention the most recent
turn of events with China Airlines and their decision not to order the 777 in
their most recent Boeing purchase. 57 777s are currently being in operated in
North America.
[MBA LOGO]
4
<PAGE> 81
- -------------------------------------------------------------------------------
IV. VALUATION
- -------------------------------------------------------------------------------
American Airlines
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Model Serial Number Tail Number Engine Type Date of Mfr Current Base Value*
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
B737-823 29510 N908AN CFM56-7B26 5/99 44.18
29511 N909AN 5/99 44.18
29512 N910AN 5/99 44.18
29513 N912AN 6/99 44.27
29515 N914AN 7/99 44.36
29516 N915AN 7/99 44.36
29517 N916AN 8/99 44.44
29518 N917AN 8/99 44.44
29519 N918AN 9/99 44.53
29520 N919AN 9/99 44.53
B767-323ER 29431 N394AN CF6-BOC2B6 6/98 86.27
29605 N398AN 4/99 89.34
29606 N399AN 5/99 89.52
B777-223IGW 29587 N778AN Trent 892 6/99 131.30
29955 N779AN 6/99 131.30
</TABLE>
*Includes adjustment for increased MTOW, at values in ($000,000)
In developing the Current Base Value of this aircraft, MBA did not inspect the
aircraft nor its historical maintenance documentation, but relied on partial
information supplied by the Client. Therefore, we used certain assumptions that
are generally accepted industry practice to calculate the value of aircraft
when more detailed information is not available. The principal assumptions are
as follows:
1. The aircraft is new (or relatively new).
2. The specifications of the aircraft are those most common for an
aircraft of its type and vintage.
3. The aircraft is in a standard airline configuration.
4. No accounting is made for lease obligations or terms of ownership.
[MBA LOGO]
5
<PAGE> 82
- ------------------------------------------------------------------------------
V. COVENANTS
- ------------------------------------------------------------------------------
This report has been prepared for the exclusive use of American Airlines and
shall not be provided to other parties by MBA without the express consent of
American Airlines.
MBA certifies that this report has been independently prepared and that it
fully and accurately reflects MBA's opinion as to the Current Market Value.
MBA further certifies that it does not have, and does not expect to have, any
financial or other interest in the subject or similar aircraft.
This report represents the opinion of MBA as to the Current Market Value of the
subject aircraft and is intended to be advisory only in nature. Therefore, MBA
assumes no responsibility or legal liability for any actions taken or not taken
by American Airlines or any other party with regard to the subject aircraft. By
accepting this report, all parties agree that MBA shall bear no such
responsibility or legal liability.
PREPARED BY:
/s/ BRYSON P. MONTELEONE
BRYSON P. MONTELEONE
DIRECTOR OF OPERATIONS
REVIEWED BY:
/s/ MORTEN S. BEYER
MORTEN S. BEYER, APPRAISER FELLOW
CHAIRMAN AND CEO
ISTAT CERTIFIED SENIOR APPRAISER
6
[MBA LOGO]
<PAGE> 83
APPENDIX III
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES A-1 EQUIPMENT NOTES
<TABLE>
<CAPTION>
REGULAR DISTRIBUTION
DATE N908AN N909AN N910AN N912AN N914AN N915AN N916AN
- -------------------- ----------- ----------- ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
April 15, 2000....... $624,420.00 $624,465.00 $624,465.00 $625,140.00 $ 0.00 $ 0.00 $ 0.00
October 15, 2000..... 925,066.67 925,133.33 925,133.33 926,133.33 1,555,996.83 1,556,108.50 1,557,113.50
April 15, 2001....... 624,420.00 624,465.00 624,465.00 625,140.00 0.00 0.00 0.00
October 15, 2001..... 0.00 0.00 0.00 0.00 627,043.50 627,088.50 627,493.50
April 15, 2002....... 624,420.00 624,465.00 624,465.00 625,140.00 0.00 0.00 0.00
October 15, 2002..... 0.00 0.00 0.00 0.00 627,043.50 627,088.50 627,493.50
April 15, 2003....... 624,420.00 624,465.00 624,465.00 625,140.00 0.00 0.00 0.00
October 15, 2003..... 0.00 0.00 0.00 0.00 627,043.50 627,088.50 627,493.50
April 15, 2004....... 624,420.00 624,465.00 624,465.00 625,140.00 0.00 0.00 0.00
October 15, 2004..... 0.00 0.00 0.00 0.00 627,043.50 627,088.50 627,493.50
April 15, 2005....... 624,420.00 624,465.00 624,465.00 625,140.00 0.00 0.00 0.00
October 15, 2005..... 0.00 0.00 0.00 0.00 627,043.50 627,088.50 627,493.50
April 15, 2006....... 624,420.00 624,465.00 624,465.00 625,140.00 0.00 0.00 0.00
October 15, 2006..... 0.00 0.00 0.00 0.00 627,043.50 627,088.50 627,493.50
April 15, 2007....... 624,420.00 624,465.00 624,465.00 625,140.00 0.00 0.00 0.00
October 15, 2007..... 0.00 0.00 0.00 0.00 627,043.50 627,088.50 627,493.50
April 15, 2008....... 624,420.00 624,465.00 624,465.00 625,140.00 0.00 0.00 0.00
October 15, 2008..... 0.00 0.00 0.00 0.00 627,043.50 627,088.50 627,493.50
April 15, 2009....... 624,420.00 624,465.00 624,465.00 625,140.00 0.00 0.00 0.00
<CAPTION>
REGULAR DISTRIBUTION
DATE N917AN
- -------------------- -------------
<S> <C>
April 15, 2000....... $ 0.00
October 15, 2000..... 1,557,113.50
April 15, 2001....... 0.00
October 15, 2001..... 627,493.50
April 15, 2002....... 0.00
October 15, 2002..... 627,493.50
April 15, 2003....... 0.00
October 15, 2003..... 627,493.50
April 15, 2004....... 0.00
October 15, 2004..... 627,493.50
April 15, 2005....... 0.00
October 15, 2005..... 627,493.50
April 15, 2006....... 0.00
October 15, 2006..... 627,493.50
April 15, 2007....... 0.00
October 15, 2007..... 627,493.50
April 15, 2008....... 0.00
October 15, 2008..... 627,493.50
April 15, 2009....... 0.00
</TABLE>
<TABLE>
<CAPTION>
REGULAR DISTRIBUTION
DATE N918AN N919AN N394AN N398AN N399AN N778AN
- -------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 15, 2000....... $ 0.00 $ 0.00 $1,201,221.65 $1,215,585.00 $1,216,935.00 $1,788,615.00
October 15, 2000..... 1,558,118.50 1,558,118.50 1,726,200.00 1,800,866.67 1,802,866.67 2,649,800.00
April 15, 2001....... 0.00 0.00 1,201,221.65 1,215,585.00 1,216,935.00 1,788,615.00
October 15, 2001..... 627,898.50 627,898.50 0.00 0.00 0.00 0.00
April 15, 2002....... 0.00 0.00 1,201,221.65 1,215,585.00 1,216,935.00 1,788,615.00
October 15, 2002..... 627,898.50 627,898.50 0.00 0.00 0.00 0.00
April 15, 2003....... 0.00 0.00 1,201,221.65 1,215,585.00 1,216,935.00 1,788,615.00
October 15, 2003..... 627,898.50 627,898.50 0.00 0.00 0.00 0.00
April 15, 2004....... 0.00 0.00 1,201,221.65 1,215,585.00 1,216,935.00 1,788,615.00
October 15, 2004..... 627,898.50 627,898.50 0.00 0.00 0.00 0.00
April 15, 2005....... 0.00 0.00 1,201,221.65 1,215,585.00 1,216,935.00 1,788,615.00
October 15, 2005..... 627,898.50 627,898.50 0.00 0.00 0.00 0.00
April 15, 2006....... 0.00 0.00 1,201,221.65 1,215,585.00 1,216,935.00 1,788,615.00
October 15, 2006..... 627,898.50 627,898.50 0.00 0.00 0.00 0.00
April 15, 2007....... 0.00 0.00 1,201,221.65 1,215,585.00 1,216,935.00 1,788,615.00
October 15, 2007..... 627,898.50 627,898.50 0.00 0.00 0.00 0.00
April 15, 2008....... 0.00 0.00 1,201,221.65 1,215,585.00 1,216,935.00 1,788,615.00
October 15, 2008..... 627,898.50 627,898.50 0.00 0.00 0.00 0.00
April 15, 2009....... 0.00 0.00 1,201,221.65 1,215,585.00 1,216,935.00 1,788,615.00
<CAPTION>
REGULAR DISTRIBUTION
DATE N779AN
- -------------------- -------------
<S> <C>
April 15, 2000....... $1,788,750.00
October 15, 2000..... 2,650,000.00
April 15, 2001....... 1,788,750.00
October 15, 2001..... 0.00
April 15, 2002....... 1,788,750.00
October 15, 2002..... 0.00
April 15, 2003....... 1,788,750.00
October 15, 2003..... 0.00
April 15, 2004....... 1,788,750.00
October 15, 2004..... 0.00
April 15, 2005....... 1,788,750.00
October 15, 2005..... 0.00
April 15, 2006....... 1,788,750.00
October 15, 2006..... 0.00
April 15, 2007....... 1,788,750.00
October 15, 2007..... 0.00
April 15, 2008....... 1,788,750.00
October 15, 2008..... 0.00
April 15, 2009....... 1,788,686.17
</TABLE>
III-1
<PAGE> 84
APPENDIX III
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES A-2 EQUIPMENT NOTES
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N908AN N909AN N910AN N912AN N914AN N915AN
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
April 15, 2000....... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
October 15, 2000..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2001....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2001..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2002....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2002..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2003....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2003..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2004....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2004..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2005....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2005..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2006....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2006..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2007....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2007..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2008....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2008..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2009....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2009..... 14,569,800.00 14,570,850.00 14,570,850.00 14,586,600.00 15,258,058.50 15,259,153.50
<CAPTION>
REGULAR
DISTRIBUTION DATE N916AN N917AN
- ----------------- -------------- --------------
<S> <C> <C>
April 15, 2000....... $ 0.00 $ 0.00
October 15, 2000..... 0.00 0.00
April 15, 2001....... 0.00 0.00
October 15, 2001..... 0.00 0.00
April 15, 2002....... 0.00 0.00
October 15, 2002..... 0.00 0.00
April 15, 2003....... 0.00 0.00
October 15, 2003..... 0.00 0.00
April 15, 2004....... 0.00 0.00
October 15, 2004..... 0.00 0.00
April 15, 2005....... 0.00 0.00
October 15, 2005..... 0.00 0.00
April 15, 2006....... 0.00 0.00
October 15, 2006..... 0.00 0.00
April 15, 2007....... 0.00 0.00
October 15, 2007..... 0.00 0.00
April 15, 2008....... 0.00 0.00
October 15, 2008..... 0.00 0.00
April 15, 2009....... 0.00 0.00
October 15, 2009..... 15,269,008.50 15,269,008.50
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N918AN N919AN N394AN N398AN N399AN N778AN
- ----------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
April 15, 2000....... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
October 15, 2000..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2001....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2001..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2002....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2002..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2003....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2003..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2004....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2004..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2005....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2005..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2006....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2006..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2007....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2007..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2008....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2008..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2009....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2009..... 15,278,863.50 15,278,863.50 26,827,283.51 28,363,650.00 28,395,150.00 41,734,350.00
<CAPTION>
REGULAR
DISTRIBUTION DATE N779AN
- ----------------- --------------
<S> <C> <C>
April 15, 2000....... $ 0.00
October 15, 2000..... 0.00
April 15, 2001....... 0.00
October 15, 2001..... 0.00
April 15, 2002....... 0.00
October 15, 2002..... 0.00
April 15, 2003....... 0.00
October 15, 2003..... 0.00
April 15, 2004....... 0.00
October 15, 2004..... 0.00
April 15, 2005....... 0.00
October 15, 2005..... 0.00
April 15, 2006....... 0.00
October 15, 2006..... 0.00
April 15, 2007....... 0.00
October 15, 2007..... 0.00
April 15, 2008....... 0.00
October 15, 2008..... 0.00
April 15, 2009....... 0.00
October 15, 2009..... 41,737,510.49
</TABLE>
III-2
<PAGE> 85
APPENDIX III
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES B EQUIPMENT NOTES
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N908AN N909AN N910AN N912AN N914AN N915AN
- ----------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 15, 2000....... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
October 15, 2000..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2001....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2001..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2002....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2002..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2003....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2003..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2004....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2004..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2005....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2005..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2006....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2006..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2007....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2007..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2008....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2008..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2009....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2009..... 3,885,280.00 3,885,560.00 3,885,560.00 3,889,760.00 4,068,815.60 4,069,107.60
<CAPTION>
REGULAR
DISTRIBUTION DATE N916AN N917AN
- ----------------- ------------- -------------
<S> <C> <C>
April 15, 2000....... $ 0.00 $ 0.00
October 15, 2000..... 0.00 0.00
April 15, 2001....... 0.00 0.00
October 15, 2001..... 0.00 0.00
April 15, 2002....... 0.00 0.00
October 15, 2002..... 0.00 0.00
April 15, 2003....... 0.00 0.00
October 15, 2003..... 0.00 0.00
April 15, 2004....... 0.00 0.00
October 15, 2004..... 0.00 0.00
April 15, 2005....... 0.00 0.00
October 15, 2005..... 0.00 0.00
April 15, 2006....... 0.00 0.00
October 15, 2006..... 0.00 0.00
April 15, 2007....... 0.00 0.00
October 15, 2007..... 0.00 0.00
April 15, 2008....... 0.00 0.00
October 15, 2008..... 0.00 0.00
April 15, 2009....... 0.00 0.00
October 15, 2009..... 4,071,735.60 4,071,735.60
</TABLE>
<TABLE>
<CAPTION>
REGULAR
DISTRIBUTION DATE N918AN N919AN N394AN N398AN N399AN N778AN
- ----------------- ------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
April 15, 2000....... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
October 15, 2000..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2001....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2001..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2002....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2002..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2003....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2003..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2004....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2004..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2005....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2005..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2006....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2006..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2007....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2007..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2008....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2008..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2009....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2009..... 4,074,363.60 4,074,363.60 7,153,942.27 7,563,640.00 7,572,040.00 11,129,160.00
<CAPTION>
REGULAR
DISTRIBUTION DATE N779AN
- ----------------- --------------
<S> <C> <C>
April 15, 2000....... $ 0.00
October 15, 2000..... 0.00
April 15, 2001....... 0.00
October 15, 2001..... 0.00
April 15, 2002....... 0.00
October 15, 2002..... 0.00
April 15, 2003....... 0.00
October 15, 2003..... 0.00
April 15, 2004....... 0.00
October 15, 2004..... 0.00
April 15, 2005....... 0.00
October 15, 2005..... 0.00
April 15, 2006....... 0.00
October 15, 2006..... 0.00
April 15, 2007....... 0.00
October 15, 2007..... 0.00
April 15, 2008....... 0.00
October 15, 2008..... 0.00
April 15, 2009....... 0.00
October 15, 2009..... 11,129,936.13
</TABLE>
III-3
<PAGE> 86
APPENDIX III
EQUIPMENT NOTE PRINCIPAL PAYMENTS
SERIES C EQUIPMENT NOTES
<TABLE>
<CAPTION>
REGULAR DISTRIBUTION
DATE N908AN N909AN N910AN N912AN N914AN N915AN
- -------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 15, 2000......... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
October 15, 2000....... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2001......... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2001....... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2002......... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2002....... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2003......... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2003....... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2004......... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2004....... 2,191,886.68 2,192,044.64 2,192,044.64 2,194,414.08 2,278,781.62 2,278,945.16
<CAPTION>
REGULAR DISTRIBUTION
DATE N916AN N917AN
- -------------------- ------------- -------------
<S> <C> <C>
April 15, 2000......... $ 0.00 $ 0.00
October 15, 2000....... 0.00 0.00
April 15, 2001......... 0.00 0.00
October 15, 2001....... 0.00 0.00
April 15, 2002......... 0.00 0.00
October 15, 2002....... 0.00 0.00
April 15, 2003......... 0.00 0.00
October 15, 2003....... 0.00 0.00
April 15, 2004......... 0.00 0.00
October 15, 2004....... 2,280,417.00 2,280,417.00
</TABLE>
<TABLE>
<CAPTION>
REGULAR DISTRIBUTION
DATE N918AN N919AN N394AN N398AN N399AN N778AN
- -------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
April 15, 2000....... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
October 15, 2000..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2001....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2001..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2002....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2002..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2003....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2003..... 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2004....... 0.00 0.00 0.00 0.00 0.00 0.00
October 15, 2004..... 2,281,888.84 2,281,888.84 4,067,797.92 4,267,039.12 4,271,777.99 6,278,532.70
<CAPTION>
REGULAR DISTRIBUTION
DATE N779AN
- -------------------- -------------
<S> <C>
April 15, 2000....... $ 0.00
October 15, 2000..... 0.00
April 15, 2001....... 0.00
October 15, 2001..... 0.00
April 15, 2002....... 0.00
October 15, 2002..... 0.00
April 15, 2003....... 0.00
October 15, 2003..... 0.00
April 15, 2004....... 0.00
October 15, 2004..... 6,279,123.77
</TABLE>
III-4
<PAGE> 87
APPENDIX IV
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES(1)
<TABLE>
<CAPTION>
N908AN N909AN
-------------------------------------- --------------------------------------
EQUIPMENT EQUIPMENT
NOTES NOTES
OUTSTANDING LOAN OUTSTANDING LOAN
PRINCIPAL ASSUMED TO PRINCIPAL ASSUMED TO
AMOUNT AIRCRAFT VALUE VALUE AMOUNT AIRCRAFT VALUE VALUE
DATE (IN MILLIONS) (IN MILLIONS) RATIO (IN MILLIONS) (IN MILLIONS) RATIO
- ---- ------------- -------------- ----- ------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
October , 1999................ $27.82 $46.25 60.1% $27.82 $46.26 60.1%
October 15, 2000................ 26.27 44.87 58.5 26.27 44.87 58.5
October 15, 2001................ 25.64 43.48 59.0 25.64 43.48 59.0
October 15, 2002................ 25.02 42.09 59.4 25.02 42.09 59.4
October 15, 2003................ 24.39 40.70 59.9 24.40 40.71 59.9
October 15, 2004................ 21.58 39.32 54.9 21.58 39.32 54.9
October 15, 2005................ 20.95 37.93 55.2 20.95 37.93 55.2
October 15, 2006................ 20.33 36.54 55.6 20.33 36.54 55.6
October 15, 2007................ 19.70 35.15 56.1 19.71 35.16 56.1
October 15, 2008................ 19.08 33.76 56.5 19.08 33.77 56.5
October 15, 2009................ 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N910AN N912AN
-------------------------------------- --------------------------------------
EQUIPMENT EQUIPMENT
NOTES NOTES
OUTSTANDING LOAN OUTSTANDING LOAN
PRINCIPAL ASSUMED TO PRINCIPAL ASSUMED TO
AMOUNT AIRCRAFT VALUE VALUE AMOUNT AIRCRAFT VALUE VALUE
DATE (IN MILLIONS) (IN MILLIONS) RATIO (IN MILLIONS) (IN MILLIONS) RATIO
- ---- ------------- -------------- ----- ------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
October , 1999................ $27.82 $46.26 60.1% $27.85 $46.31 60.1%
October 15, 2000................ 26.27 44.87 58.5 26.30 44.92 58.5
October 15, 2001................ 25.64 43.48 59.0 25.67 43.53 59.0
October 15, 2002................ 25.02 42.09 59.4 25.05 42.14 59.4
October 15, 2003................ 24.40 40.71 59.9 24.42 40.75 59.9
October 15, 2004................ 21.58 39.32 54.9 21.60 39.36 54.9
October 15, 2005................ 20.95 37.93 55.2 20.98 37.97 55.2
October 15, 2006................ 20.33 36.54 55.6 20.35 36.58 55.6
October 15, 2007................ 19.71 35.16 56.1 19.73 35.19 56.1
October 15, 2008................ 19.08 33.77 56.5 19.10 33.80 56.5
October 15, 2009................ 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
- ---------------
(1) For a description of the methodology used to calculate the loan to value
ratios of the Equipment Notes issued in respect of each Aircraft set forth
in this table and certain important assumptions and qualifications relating
thereto, see "Description of the Equipment Notes -- Loan to Value Ratios of
Equipment Notes."
IV-1
<PAGE> 88
<TABLE>
<CAPTION>
N914AN N915AN
-------------------------------------- --------------------------------------
EQUIPMENT EQUIPMENT
NOTES NOTES
OUTSTANDING LOAN OUTSTANDING LOAN
PRINCIPAL ASSUMED TO PRINCIPAL ASSUMED TO
AMOUNT AIRCRAFT VALUE VALUE AMOUNT AIRCRAFT VALUE VALUE
DATE (IN MILLIONS) (IN MILLIONS) RATIO (IN MILLIONS) (IN MILLIONS) RATIO
- ---- ------------- -------------- ----- ------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
October , 1999................ $28.18 $46.45 60.7% $28.18 $46.45 60.7%
October 15, 2000................ 26.62 45.05 59.1 26.62 45.06 59.1
October 15, 2001................ 25.99 43.66 59.5 26.00 43.66 59.5
October 15, 2002................ 25.37 42.27 60.0 25.37 42.27 60.0
October 15, 2003................ 24.74 40.87 60.5 24.74 40.88 60.5
October 15, 2004................ 21.84 39.48 55.3 21.84 39.48 55.3
October 15, 2005................ 21.21 38.09 55.7 21.21 38.09 55.7
October 15, 2006................ 20.58 36.69 56.1 20.58 36.70 56.1
October 15, 2007................ 19.95 35.30 56.5 19.96 35.30 56.5
October 15, 2008................ 19.33 33.91 57.0 19.33 33.91 57.0
October 15, 2009................ 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N916AN N917AN
-------------------------------------- --------------------------------------
EQUIPMENT EQUIPMENT
NOTES NOTES
OUTSTANDING LOAN OUTSTANDING LOAN
PRINCIPAL ASSUMED TO PRINCIPAL ASSUMED TO
AMOUNT AIRCRAFT VALUE VALUE AMOUNT AIRCRAFT VALUE VALUE
DATE (IN MILLIONS) (IN MILLIONS) RATIO (IN MILLIONS) (IN MILLIONS) RATIO
- ---- ------------- -------------- ----- ------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
October , 1999................ $28.20 $46.48 60.7% $28.20 $46.48 60.7%
October 15, 2000................ 26.64 45.09 59.1 26.64 45.09 59.1
October 15, 2001................ 26.01 43.69 59.5 26.01 43.69 59.5
October 15, 2002................ 25.39 42.30 60.0 25.39 42.30 60.0
October 15, 2003................ 24.76 40.90 60.5 24.76 40.90 60.5
October 15, 2004................ 21.85 39.51 55.3 21.85 39.51 55.3
October 15, 2005................ 21.22 38.11 55.7 21.22 38.11 55.7
October 15, 2006................ 20.60 36.72 56.1 20.60 36.72 56.1
October 15, 2007................ 19.97 35.33 56.5 19.97 35.33 56.5
October 15, 2008................ 19.34 33.93 57.0 19.34 33.93 57.0
October 15, 2009................ 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
IV-2
<PAGE> 89
<TABLE>
<CAPTION>
N918AN N919AN
---------------------------------------- ----------------------------------------
EQUIPMENT NOTES EQUIPMENT NOTES
OUTSTANDING LOAN OUTSTANDING LOAN
PRINCIPAL ASSUMED TO PRINCIPAL ASSUMED TO
AMOUNT AIRCRAFT VALUE VALUE AMOUNT AIRCRAFT VALUE VALUE
DATE (IN MILLIONS) (IN MILLIONS) RATIO (IN MILLIONS) (IN MILLIONS) RATIO
- ---- --------------- -------------- ----- --------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
October , 1999.......... $28.22 $46.51 60.7% $28.22 $46.51 60.7%
October 15, 2000.......... 26.66 45.12 59.1 26.66 45.12 59.1
October 15, 2001.......... 26.03 43.72 59.5 26.03 43.72 59.5
October 15, 2002.......... 25.40 42.33 60.0 25.40 42.33 60.0
October 15, 2003.......... 24.77 40.93 60.5 24.77 40.93 60.5
October 15, 2004.......... 21.86 39.53 55.3 21.86 39.53 55.3
October 15, 2005.......... 21.24 38.14 55.7 21.24 38.14 55.7
October 15, 2006.......... 20.61 36.74 56.1 20.61 36.74 56.1
October 15, 2007.......... 19.98 35.35 56.5 19.98 35.35 56.5
October 15, 2008.......... 19.35 33.95 57.0 19.35 33.95 57.0
October 15, 2009.......... 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N394AN N398AN
---------------------------------------- ----------------------------------------
EQUIPMENT NOTES EQUIPMENT NOTES
OUTSTANDING LOAN OUTSTANDING LOAN
PRINCIPAL ASSUMED TO PRINCIPAL ASSUMED TO
AMOUNT AIRCRAFT VALUE VALUE AMOUNT AIRCRAFT VALUE VALUE
DATE (IN MILLIONS) (IN MILLIONS) RATIO (IN MILLIONS) (IN MILLIONS) RATIO
- ---- --------------- -------------- ----- --------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
October , 1999.......... $51.79 $86.31 60.0% $54.15 $90.04 60.1%
October 15, 2000.......... 48.86 83.64 58.4 51.13 87.34 58.5
October 15, 2001.......... 47.66 80.97 58.9 49.92 84.64 59.0
October 15, 2002.......... 46.46 78.30 59.3 48.70 81.94 59.4
October 15, 2003.......... 45.26 75.63 59.8 47.49 79.24 59.9
October 15, 2004.......... 39.99 72.96 54.8 42.01 76.54 54.9
October 15, 2005.......... 38.79 70.29 55.2 40.79 73.84 55.2
October 15, 2006.......... 37.58 67.62 55.6 39.57 71.13 55.6
October 15, 2007.......... 36.38 64.95 56.0 38.36 68.43 56.1
October 15, 2008.......... 35.18 62.29 56.5 37.14 65.73 56.5
October 15, 2009.......... 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
IV-3
<PAGE> 90
<TABLE>
<CAPTION>
N399AN N778AN
---------------------------------------- ----------------------------------------
EQUIPMENT NOTES EQUIPMENT NOTES
OUTSTANDING LOAN OUTSTANDING LOAN
PRINCIPAL ASSUMED TO PRINCIPAL ASSUMED TO
AMOUNT AIRCRAFT VALUE VALUE AMOUNT AIRCRAFT VALUE VALUE
DATE (IN MILLIONS) (IN MILLIONS) RATIO (IN MILLIONS) (IN MILLIONS) RATIO
- ---- --------------- -------------- ----- --------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
October , 1999.......... $54.21 $90.14 60.1% $79.68 $132.49 60.1%
October 15, 2000.......... 51.19 87.44 58.5 75.24 128.52 58.5
October 15, 2001.......... 49.97 84.73 59.0 73.45 124.54 59.0
October 15, 2002.......... 48.76 82.03 59.4 71.66 120.57 59.4
October 15, 2003.......... 47.54 79.33 59.9 69.87 116.59 59.9
October 15, 2004.......... 42.05 76.62 54.9 61.81 112.62 54.9
October 15, 2005.......... 40.83 73.92 55.2 60.02 108.64 55.2
October 15, 2006.......... 39.62 71.21 55.6 58.23 104.67 55.6
October 15, 2007.......... 38.40 68.51 56.1 56.44 100.69 56.1
October 15, 2008.......... 37.18 65.80 56.5 54.65 96.72 56.5
October 15, 2009.......... 0.00 0.00 NA 0.00 0.00 NA
</TABLE>
<TABLE>
<CAPTION>
N779AN
----------------------------------------
EQUIPMENT NOTES
OUTSTANDING LOAN
PRINCIPAL ASSUMED TO
AMOUNT AIRCRAFT VALUE VALUE
DATE (IN MILLIONS) (IN MILLIONS) RATIO
- ---- --------------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
October , 1999.......... $79.68 $132.50 60.1%
October 15, 2000.......... 75.25 128.53 58.5
October 15, 2001.......... 73.46 124.55 59.0
October 15, 2002.......... 71.67 120.58 59.4
October 15, 2003.......... 69.88 116.60 59.9
October 15, 2004.......... 61.81 112.63 54.9
October 15, 2005.......... 60.02 108.65 55.2
October 15, 2006.......... 58.23 104.68 55.6
October 15, 2007.......... 56.44 100.70 56.1
October 15, 2008.......... 54.66 96.73 56.5
October 15, 2009.......... 0.00 0.00 NA
</TABLE>
IV-4
<PAGE> 91
$1,250,000,000
AMERICAN AIRLINES, INC.
PASS THROUGH CERTIFICATES
This Prospectus relates to the issuance of Pass Through Certificates by one
or more Pass Through Trusts to be formed by American Airlines, Inc. We will
describe the specific terms of any offering of Pass Through Certificates in a
Prospectus Supplement to this Prospectus. You should read this Prospectus and
the applicable Prospectus Supplements carefully before you invest.
THE PASS THROUGH CERTIFICATES --
- Will be issued in one or more series.
- Will be payable at the times and in the amounts specified in the
accompanying Prospectus Supplement.
- Will represent interests in the relevant Trust only, will be paid only
from the assets of that Trust and will not represent obligations of, or
be guaranteed by, American.
- May have one or more forms of credit or liquidity enhancement.
EACH PASS THROUGH TRUST --
- Will own:
- Equipment Notes of one or more series, and
- other property described in this Prospectus and the accompanying
Prospectus Supplement.
- Will pass through payments on the Equipment Notes and other property that
it owns, subject to any applicable subordination provisions.
THE EQUIPMENT NOTES --
- Will be either
- Owned Aircraft Notes issued by American, or
- Leased Aircraft Notes issued on a non-recourse basis by owner trustees
pursuant to aircraft leveraged leases with American. The amounts due
from American under each such lease will be sufficient to make all
regularly scheduled payments required on the related Equipment Notes,
subject to some limited exceptions.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is April 30, 1999.
<PAGE> 92
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus....................................... 2
Where You Can Find More Information......................... 2
The Company................................................. 4
Ratio of Earnings to Fixed Charges.......................... 4
Formation of the Trusts..................................... 4
Use of Proceeds............................................. 5
Description of the Pass Through Certificates................ 5
Description of the Equipment Notes.......................... 18
Credit Enhancements......................................... 24
Certain Federal Income Tax Consequences..................... 24
Certain Connecticut Taxes................................... 26
ERISA Considerations........................................ 26
Plan of Distribution........................................ 27
Legal Opinions.............................................. 28
Experts..................................................... 28
</TABLE>
<PAGE> 93
ABOUT THIS PROSPECTUS
This Prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission (the "SEC") utilizing a
"shelf" registration process. Under this shelf process, we may sell the Pass
Through Certificates described in this Prospectus in one or more offerings. This
Prospectus provides you with a general description of the Pass Through
Certificates we may offer. Each time we sell Pass Through Certificates, we will
provide a Prospectus Supplement that will contain specific information about the
terms of that offering. The Prospectus Supplement may also add, update or change
information contained in this Prospectus. You should read carefully both this
Prospectus and any applicable Prospectus Supplement, together with the
additional information described below under "Where You Can Find More
Information."
This Prospectus does not contain all of the information set forth in the
registration statement that we filed with the SEC or in the exhibits to that
registration statement. For further information about American or the Pass
Through Certificates, you should refer to that registration statement and its
exhibits. Statements contained in this Prospectus or in any Prospectus
Supplement as to the contents of any contract or other document are not
necessarily complete, and you should review the full text of those contracts and
other documents.
The registration statement that we filed with the SEC relating to the Pass
Through Certificates can be obtained from the SEC, as described below under
"Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports with the SEC. These SEC
filings are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any such document we file at the
SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549,
and in New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms and copy
charges.
The SEC allows us to "incorporate by reference" the information we file
with it, which means:
- we can disclose important information to you by referring you to those
documents;
- information incorporated by reference is considered to be part of this
Prospectus, even though it is not repeated in this Prospectus or in any
Prospectus Supplement; and
- information that we file with the SEC will automatically update and
supersede this Prospectus and any Prospectus Supplements.
2
<PAGE> 94
We incorporate by reference the documents listed below and any future
filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") until we complete our
offering of Pass Through Certificates:
- Annual Report on Form 10-K for the year ended December 31, 1998.
- Current Reports on Form 8-K filed February 18, 1999, February 24, 1999,
March 18, 1999 and April 23, 1999.
You may obtain a copy of these filings (other than their exhibits, unless
those exhibits are specifically incorporated by reference in the filings) at no
cost by writing or telephoning us at the following address:
Corporate Secretary
American Airlines, Inc.
P.O. Box 619616, Mail Drop 5675
Dallas/Fort Worth Airport, Texas 75261-9616
(817) 963-1234
You should rely only on the information incorporated by reference or
provided in this Prospectus or any applicable Prospectus Supplement. We have not
authorized anyone else to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not making an offer to sell any Pass Through Certificates in any
jurisdiction where the offer or sale is not permitted. You should not assume
that the information in this Prospectus or any Prospectus Supplement is accurate
as of any date other than the date on the front page of those documents. Also,
you should not assume that there has been no change in the affairs of American
since the date of this Prospectus or any applicable Prospectus Supplement.
3
<PAGE> 95
THE COMPANY
American, the principal subsidiary of AMR Corporation, was founded in 1934.
American is one of the largest scheduled passenger airlines in the world. At the
end of 1998, American provided scheduled jet service to more than 180
destinations throughout North America, the Caribbean, Latin America, Europe and
the Pacific. American is also one of the largest scheduled air freight carriers
in the world, providing a full range of freight and mail services to shippers
throughout its system.
The postal address for American's principal executive offices is P.O. Box
619616, Dallas/Fort Worth Airport, Texas 75261-9616 (Telephone: 817-963-1234).
RATIO OF EARNINGS TO FIXED CHARGES
The following table contains American's ratio of earnings to fixed charges
for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges...... 1.07 1.00 1.88 2.27 2.82
</TABLE>
For purposes of the table, "earnings" represents American's consolidated
income from continuing operations before income taxes, extraordinary items and
fixed charges (excluding interest capitalized). "Fixed charges" consists of
interest expense (including interest capitalized), amortization of debt expense
and the portion of rental expense we deem representative of the interest factor.
FORMATION OF THE TRUSTS
American will enter into a Pass Through Trust Agreement (the "Basic
Agreement") with State Street Bank and Trust Company of Connecticut, National
Association, as Trustee (the "Trustee"). Each series of Pass Through
Certificates will be issued by a separate Trust. Each separate Trust will be
formed pursuant to the Basic Agreement and a specific supplement to the Basic
Agreement (each, a "Trust Supplement") between American and the Trustee. All
Pass Through Certificates issued by a particular Trust will represent fractional
undivided interests in such Trust and the property held in such Trust, and,
subject to the effect of any cross-subordination provisions described in the
applicable Prospectus Supplement, will have no rights, benefits or interest in
respect of any other Trust or the property held in any other Trust.
Concurrently with the execution and delivery of each Trust Supplement, the
Trustee, on behalf of the Trust formed by the Trust Supplement, will enter into
one or more agreements (each such agreement being herein referred to as a "Note
Purchase Agreement") pursuant to which it will agree to purchase one or more
Equipment Notes. All of the Equipment Notes that constitute the property of any
one Trust will have an identical interest rate, and this interest rate will be
equal to the rate applicable to the Pass Through Certificates issued by such
Trust. The maturity dates of the Equipment Notes acquired by each Trust will
occur on or before the final distribution date applicable to the Pass Through
Certificates issued by such Trust. The Trustee will distribute principal,
premium, if any, and interest payments received by it as holder of the Equipment
Notes to the registered holders of Pass Through Certificates (the
"Certificateholders") of the Trust in which such Equipment Notes are held,
subject to the effect of any cross-subordination provisions described in the
applicable Prospectus Supplement.
4
<PAGE> 96
USE OF PROCEEDS
Except as set forth in the applicable Prospectus Supplement, the Trustee
for each Trust will use the proceeds from the sale of the Pass Through
Certificates issued by such Trust to purchase one or more Owned Aircraft Notes
or Leased Aircraft Notes. The Owned Aircraft Notes will be secured by certain
aircraft owned or to be owned by American ("Owned Aircraft"), and the Leased
Aircraft Notes will be secured by certain aircraft leased or to be leased to
American ("Leased Aircraft"). In certain cases, Owned Aircraft Notes or Leased
Aircraft Notes may be issued to refinance debt, lease or other transactions
previously entered into to finance the applicable aircraft.
A Trust may hold Owned Aircraft Notes or Leased Aircraft Notes that are
subordinated in right of payment to other Equipment Notes or other debt related
to the same Owned or Leased Aircraft. In addition, the Trustees on behalf of one
or more Trusts may enter into an intercreditor or subordination agreement
establishing priorities among series of Pass Through Certificates. Also, a
liquidity facility may support one or more payments on the Equipment Notes or
Pass Through Certificates of one or more series. We will describe any such
credit enhancements in the applicable Prospectus Supplement.
To the extent that the Trustee does not use the proceeds of any offering of
Pass Through Certificates to purchase Equipment Notes on the date of issuance of
such Pass Through Certificates, it will hold such proceeds for the benefit of
the holders of such Pass Through Certificates under arrangements that we will
describe in the applicable Prospectus Supplement. If the Trustee does not
subsequently use any portion of such proceeds to purchase Equipment Notes by the
relevant date specified in the applicable Prospectus Supplement, it will return
that portion of such proceeds to the holders of such Pass Through Certificates.
In addition, we may offer Pass Through Certificates subject to delayed
aircraft financing arrangements, such as the following:
- A Trust may purchase Leased Aircraft Notes issued by an Owner Trustee
prior to the purchase of certain Leased Aircraft by such Owner Trustee or
the commencement of the related Lease.
- A Trust may purchase Owned Aircraft Notes issued by American prior to the
expected delivery date of certain Owned Aircraft.
- The proceeds of the offering of such Pass Through Certificates may be
invested with a depositary or represented by escrow receipts until used
to purchase Equipment Notes.
In such circumstances, we will describe in the Prospectus Supplement how
the proceeds of the Pass Through Certificates will be held or applied during any
such delayed aircraft financing period, including any depositary or escrow
arrangements.
DESCRIPTION OF THE PASS THROUGH CERTIFICATES
The following description is a summary of the terms of the Pass Through
Certificates that we expect will be common to all series. Most of the financial
terms and other specific terms of any series of Pass Through Certificates will
be described in a Prospectus Supplement to be attached to this Prospectus. Since
the terms of the specific Pass Through Certificates may differ from the general
information provided below, you should rely on the information in the Prospectus
Supplement instead of the information in this Prospectus if the information in
the Prospectus Supplement is different from the information below.
Because the following description is a summary, it does not describe every
aspect of the Pass Through Certificates, and it is subject to and qualified in
its entirety by reference to all the provisions of the Basic Agreement and the
applicable Trust Supplements. The form of Basic Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
American will file with the SEC the Trust Supplement relating to each series of
Pass Through Certificates and the forms of Indenture, Lease (if any), Note
Purchase Agreement, intercreditor and subordination agreement (if any) and
liquidity facility agreement (if any) relating to any offering of Pass Through
Certificates as exhibits to a post-effective amendment
5
<PAGE> 97
to the Registration Statement of which this Prospectus is a part or a Current
Report on Form 8-K, a Quarterly Report on Form 10-Q or an Annual Report on Form
10-K.
The Pass Through Certificates offered pursuant to this Prospectus will be
limited to $1,250,000,000 aggregate public offering price (or its equivalent
(based on the applicable exchange rate at the time of sale) in one or more
foreign or composite currencies or currency units).
To the extent that any provision in any Prospectus Supplement is
inconsistent with any provision in this summary, the provision in such
Prospectus Supplement will control.
GENERAL
The Pass Through Certificates of each Trust will be issued in fully
registered form only. Each Pass Through Certificate will represent a fractional
undivided interest in the separate Trust created by the Basic Agreement and the
Trust Supplement pursuant to which such Pass Through Certificate is issued, and
all payments and distributions will be made only from the Trust Property of each
Trust. The Trust Property will include (i) the Equipment Notes held in such
Trust and all monies at any time paid thereon and all monies due and to become
due thereunder, subject to the effect of any cross-subordination provisions
described in the applicable Prospectus Supplement, (ii) funds from time to time
deposited with the Trustee in accounts relating to such Trust and (iii) if so
specified in the applicable Prospectus Supplement, rights under any cross-
subordination arrangements, monies receivable under any liquidity facility and
any other rights or property described therein.
Equipment Notes may be Owned Aircraft Notes or Leased Aircraft Notes.
American will issue Owned Aircraft Notes under separate trust indentures (the
"Owned Aircraft Indentures") between American and a bank, trust company or other
institution or person specified in the related Prospectus Supplement, as trustee
thereunder (in such capacity, herein referred to as the "Loan Trustee"). The
Owned Aircraft Notes will be recourse obligations of American. The Owned
Aircraft may secure additional debt or be subject to other financing
arrangements.
Leased Aircraft Notes will be issued in connection with the leveraged lease
of Leased Aircraft to American. Except as set forth in the applicable Prospectus
Supplement, each Leased Aircraft will be leased to American under a lease (a
"Lease") between American and a bank, trust company or other institution acting
not in its individual capacity but solely as trustee (an "Owner Trustee") of a
separate trust for the benefit of one or more beneficial owners (each, an "Owner
Participant") of the Leased Aircraft. Owner Participants may include American or
affiliates of American. The Owner Trustee will issue the Leased Aircraft Notes
on a non-recourse basis under separate trust indentures (the "Leased Aircraft
Indentures") between it and the applicable Loan Trustee to finance or refinance
a portion of the cost to it of the applicable Leased Aircraft. The Owner Trustee
will obtain a portion of the funding for the Leased Aircraft from the equity
investments of the related Owner Participants and, to the extent set forth in
the applicable Prospectus Supplement, additional debt secured by such Leased
Aircraft or other sources. The Leased Aircraft also may be subject to other
financing arrangements. No Owner Trustee or Owner Participant, however, will be
personally liable for any principal or interest payable under the related Leased
Aircraft Indenture or the Leased Aircraft Notes issued thereunder. The rents and
other amounts payable by American under the Lease relating to any Leased
Aircraft will be in amounts sufficient to pay when due all principal and
interest payments on the Leased Aircraft Notes issued under the Leased Aircraft
Indenture in respect of such Leased Aircraft, subject to some limited
exceptions.
Each Pass Through Certificate will represent a pro rata share of the
outstanding principal amount of the Equipment Notes and other property held in
the related Trust. Unless otherwise specified in the applicable Prospectus
Supplement, each Pass Through Certificate will be issued in minimum
denominations of $1,000 or any integral multiple of $1,000 except that one Pass
Through Certificate of each series may be issued in a different denomination.
The Pass Through Certificates do not represent an interest in or obligation of
American, the Trustee, any of the Loan Trustees or Owner Trustees in their
individual capacities, any Owner Participant, or any of their respective
affiliates. Each Certificateholder by its acceptance of a Pass Through
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Certificate agrees to look solely to the income and proceeds from the Trust
Property of the applicable Trust as provided in the Basic Agreement and the
applicable Trust Supplement.
A Trust may hold Owned Aircraft Notes or Leased Aircraft Notes that are
subordinated in right of payment to other Equipment Notes or other debt relating
to the same or certain related Owned Aircraft or Leased Aircraft. In addition,
the Trustees on behalf of one or more Trusts may enter into an intercreditor or
subordination agreement or similar arrangements establishing priorities among
series of Pass Through Certificates. Also, payments in respect of the Pass
Through Certificates of one or more series, or the Equipment Notes of one or
more series, or both, may be supported by a liquidity facility or similar
arrangements. See "Credit Enhancements" below. Any such intercreditor,
subordination, liquidity facility or other credit enhancement arrangements will
be described in the applicable Prospectus Supplement. This description assumes
that the Pass Through Certificates will be issued without credit enhancements.
If any credit enhancements are used, certain terms of the Pass Through
Certificates will differ in some respects from the terms described in this
Prospectus. The applicable Prospectus Supplement will reflect the material
differences arising from any such credit enhancements.
In addition, this description generally assumes that, on or before the date
of the sale of any series of Pass Through Certificates, the related Aircraft
shall have been delivered and the ownership or lease financing arrangements for
such Aircraft shall have been put in place. However, it is possible that some or
all of the Aircraft related to a particular offering of Pass Through
Certificates may be subject to certain delayed aircraft financing arrangements.
See "Description of the Equipment Notes -- General" below. In the event of any
delayed aircraft financing arrangements, certain terms of the Pass Through
Certificates will differ in some respects from the terms described in this
Prospectus. The applicable Prospectus Supplement will reflect the material
differences arising from any such delayed aircraft financing arrangements.
Interest will be passed through to Certificateholders of each Trust at the
rate per annum payable on the Equipment Notes held in such Trust, as set forth
for such Trust on the cover page of the applicable Prospectus Supplement,
subject to the effect of any cross-subordination provisions described in the
applicable Prospectus Supplement.
Reference is made to the Prospectus Supplement that accompanies this
Prospectus for a description of the specific series of Pass Through Certificates
being offered thereby, including:
(1) the specific designation and title of such Pass Through
Certificates and the related Trust;
(2) the Regular Distribution Dates (as defined below) and Special
Distribution Dates (as defined below) applicable to such Pass Through
Certificates;
(3) the currency or currencies (including composite currencies or
currency units) in which such Pass Through Certificates may be denominated
or payable;
(4) the specific form of such Pass Through Certificates, including
whether or not such Pass Through Certificates are to be issued in
accordance with a book-entry system or in bearer form;
(5) a description of the Equipment Notes to be purchased by such
Trust, including (a) the period or periods within which, the price or
prices at which, and the terms and conditions upon which such Equipment
Notes may or must be redeemed, purchased or defeased, in whole or in part,
by American or, with respect to Leased Aircraft Notes, the Owner Trustee or
Owner Participant, (b) the payment priority of such Equipment Notes in
relation to any other Equipment Notes or other debt issued with respect to
the same Aircraft, (c) any additional security or liquidity enhancements
therefor and (d) any intercreditor or other rights or limitations between
or among the holders of Equipment Notes of different priorities issued with
respect to the same Aircraft;
(6) a description of the related Aircraft, including whether each such
Aircraft is a Leased Aircraft or an Owned Aircraft;
(7) a description of the related Note Purchase Agreement and related
Indentures, including a description of the events of default under the
related Indentures, the remedies exercisable upon the
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occurrence of such events of default and any limitations on the exercise of
such remedies with respect to such Equipment Notes;
(8) if such Pass Through Certificates relate to Leased Aircraft, a
description of the related Leases, including (a) the names of the related
Owner Trustees, (b) a description of the events of default under the
related Leases, the remedies exercisable upon the occurrence of such events
of default and any limitations on the exercise of such remedies with
respect to the applicable Leased Aircraft Notes, and (c) the rights, if
any, of the related Owner Trustee or Owner Participant to cure failures of
American to pay rent under the related Lease;
(9) the extent, if any, to which the provisions of the operative
documents applicable to such Equipment Notes may be amended by the parties
thereto without the consent of the holders of, or only upon the consent of
the holders of a specified percentage of aggregate principal amount of,
such Equipment Notes;
(10) cross-default or cross-collateralization provisions in the
related Indentures, if any;
(11) a description of any intercreditor, subordination or similar
provisions among the holders of Pass Through Certificates, including any
cross-subordination provisions and provisions relating to control of
remedies among the holders of Pass Through Certificates issued by separate
Trusts;
(12) any arrangements for the investment or other use of proceeds of
the Pass Through Certificates prior to the purchase of Equipment Notes, and
any arrangements relating to any delayed aircraft financing arrangements;
(13) a description of any deposit or escrow agreement, any liquidity
or revolving credit facility or other like arrangement providing
collateralization, credit support or liquidity enhancements for any series
of Pass Through Certificates or any class of Equipment Notes; and
(14) a description of any other special terms pertaining to such Pass
Through Certificates, including any modification of the terms set forth
herein.
If any Pass Through Certificates are denominated in one or more foreign or
composite currencies or currency units, any restrictions, special United States
federal income tax considerations and other special information with respect to
such Pass Through Certificates and such foreign or composite currency or
currency units will be set forth in the applicable Prospectus Supplement.
If any Pass Through Certificates relate to Equipment Notes that are sold at
a substantial discount below the principal amount of such Equipment Notes,
special United States federal income tax considerations and other special
information with respect to such Pass Through Certificates will be set forth in
the applicable Prospectus Supplement.
The Basic Agreement does not and the Indentures will not include financial
covenants or "event risk" provisions specifically designed to afford
Certificateholders protection in the event of a highly leveraged transaction
affecting American. However, the Certificateholders of each series will have the
benefit of a lien on the specific Aircraft securing the related Equipment Notes
held in the related Trust. See "Description of the Equipment Notes -- Security."
To the extent described in a Prospectus Supplement, American will have the
right to surrender Pass Through Certificates issued by a Trust to the Trustee
for such Trust. In such event, the Trustee will transfer to American an equal
principal amount of Equipment Notes relating to a particular Aircraft designated
by American and will cancel the surrendered Pass Through Certificates.
BOOK-ENTRY REGISTRATION
General.
Except as otherwise described in the applicable Prospectus Supplement, Pass
Through Certificates will be subject to the provisions described below.
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Upon issuance, each series of Pass Through Certificates will be represented
by one or more fully registered global certificates. Unless otherwise provided
in a Prospectus Supplement, each global certificate will be deposited with, or
on behalf of, The Depository Trust Company ("DTC") and registered in the name of
Cede & Co. ("Cede"), the nominee of DTC. No person acquiring an interest in such
Pass Through Certificates ("Certificate Owner") will be entitled to receive a
certificate representing such person's interest in such Pass Through
Certificates, except as set forth below under "-- Definitive Certificates."
Unless and until Definitive Certificates (as defined below) are issued under the
limited circumstances described herein, all references in this Prospectus and in
any Prospectus Supplement to actions by Certificateholders will refer to actions
taken by DTC upon instructions from DTC Participants (as defined below), and all
references to distributions, notices, reports and statements to
Certificateholders will refer, as the case may be, to distributions, notices,
reports and statements to DTC or Cede, as the registered holder of such Pass
Through Certificates, or to DTC Participants for distribution to Certificate
Owners in accordance with DTC procedures.
DTC has advised American that DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to Section
17A of the Exchange Act. DTC was created to hold securities for its participants
("DTC Participants") and to facilitate the clearance and settlement of
securities transactions between DTC Participants through electronic book-
entries, thereby eliminating the need for physical transfer of certificates. DTC
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Indirect access to the
DTC system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly ("Indirect Participants").
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Pass Through Certificates among DTC Participants on whose behalf it acts with
respect to the Pass Through Certificates. Certificate Owners that are not DTC
Participants but that desire to purchase, sell or otherwise transfer ownership
of, or other interests in, Pass Through Certificates may do so only through DTC
Participants. DTC Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Pass Through Certificates, however, are
required to make book-entry transfers on behalf of their respective customers.
In addition, under the Rules, DTC is required to receive and transmit to the DTC
Participants distributions of principal of, premium, if any, and interest with
respect to the Pass Through Certificates. Certificate Owners thus will receive
all distributions of principal, premium, if any, and interest from the Trustee
through DTC Participants or Indirect Participants, as the case may be. Under
this book-entry system, Certificate Owners may experience some delay in their
receipt of payments because such payments will be forwarded by the Trustee to
Cede, as nominee for DTC, and DTC in turn will forward the payments to the
appropriate DTC Participants in amounts proportionate to the principal amount of
such DTC Participants' respective holdings of beneficial interests in the Pass
Through Certificates, as shown on the records of DTC or its nominee.
Distributions by DTC Participants to Indirect Participants or Certificate
Owners, as the case may be, will be the responsibility of such DTC Participants.
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, the only "Certificateholder" under the Basic
Agreement will be Cede, as nominee of DTC. Certificate Owners therefore will not
be recognized by the Trustee as Certificateholders, as such term is used in the
Basic Agreement, and Certificate Owners will be permitted to exercise the rights
of Certificateholders only indirectly through DTC and DTC Participants. DTC has
advised American that it will take any action permitted to be taken by
Certificateholders under the Basic Agreement only at the direction of one or
more DTC Participants to whose accounts with DTC the Pass Through Certificates
are credited. Additionally, DTC has advised American that in the event any
action requires approval by Certificateholders of a certain percentage of
beneficial interest in each Trust, DTC will take such action only at the
direction of and on behalf of DTC Participants whose holdings include undivided
interests that satisfy any such percentage. DTC may take conflicting actions
with respect to other undivided interests to the extent that such actions are
taken on behalf of DTC Participants whose holdings include such undivided
interests. Conveyance of notices and other
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communications by DTC to DTC Participants and by DTC Participants to Indirect
Participants and to Certificate Owners will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect Participants, the ability of a Certificate Owner to pledge
Pass Through Certificates to persons or entities that do not participate in the
DTC system, or to otherwise act with respect to such Pass Through Certificates,
may be limited due to the lack of a physical certificate for such Pass Through
Certificates.
Neither American nor the Trustee nor any agent of American or the Trustee
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Pass
Through Certificates held by Cede, as nominee for DTC; for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests; or for the performance by DTC, any DTC Participant or any Indirect
Participant of their respective obligations under the Rules or any other
statutory, regulatory, contractual or customary procedures governing their
obligations.
The applicable Prospectus Supplement will specify any additional book-entry
registration procedures applicable to Pass Through Certificates denominated in a
currency other than United States dollars.
The information contained in this Prospectus concerning DTC and its
book-entry system has been obtained from sources American believes to be
reliable, but American has not verified such information and takes no
responsibility for the accuracy thereof.
Same-Day Settlement and Payment.
As long as Pass Through Certificates are registered in the name of DTC or
its nominee, all payments made by American to the Loan Trustee under any Lease
or any Owned Aircraft Indenture will be in immediately available funds. Such
payments, including the final distribution of principal with respect to the Pass
Through Certificates of any Trust, will be passed through to DTC in immediately
available funds.
Any Pass Through Certificates registered in the name of DTC or its nominee
will trade in DTC's Same-Day Funds Settlement System until maturity, and
secondary market trading activity in the Pass Through Certificates will
therefore be required by DTC to settle in immediately available funds. No
assurance can be given as to the effect, if any, of settlement in same-day funds
on trading activity in the Pass Through Certificates.
Definitive Certificates.
Pass Through Certificates will be issued in certificated form ("Definitive
Certificates") to Certificate Owners or their nominees, rather than to DTC or
its nominee, only if (i) American advises the Trustee in writing that DTC is no
longer willing or able to discharge properly its responsibilities as depository
with respect to such Pass Through Certificates and American is unable to locate
a qualified successor, (ii) American, at its option, elects to terminate the
book-entry system through DTC or (iii) after the occurrence of certain events of
default or other events specified in the related Prospectus Supplement,
Certificate Owners with fractional undivided interests aggregating not less than
a majority in interest in such Trust advise the Trustee, American and DTC
through DTC Participants in writing that the continuation of a book-entry system
through DTC (or a successor thereto) is no longer in the Certificate Owners'
best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee will be required to notify all affected Certificate
Owners through DTC Participants of the availability of Definitive Certificates.
Upon surrender by DTC of the global certificates representing the Pass Through
Certificates and receipt of instructions for re-registration, the Trustee will
reissue the Pass Through Certificates as Definitive Certificates to Certificate
Owners.
Distributions of principal of, premium, if any, and interest on the Pass
Through Certificates will thereafter be made by the Trustee, in accordance with
the procedures set forth in the Basic Agreement and the applicable Trust
Supplements, directly to holders in whose names such Definitive Certificates
were
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registered at the close of business on the applicable record date. Such
distributions will be made by check mailed to the address of each such holder as
it appears on the register maintained by the Trustee. The final payment on any
Pass Through Certificate, however, will be made only upon presentation and
surrender of such Pass Through Certificate at the office or agency specified in
the notice of final distribution to Certificateholders.
Definitive Certificates will be freely transferable and exchangeable at the
office of the Trustee upon compliance with the requirements set forth in the
Basic Agreement and the applicable Trust Supplements. No service charge will be
imposed for any registration of transfer or exchange, but payment of a sum
sufficient to cover any tax or other governmental charge will be required.
PAYMENTS AND DISTRIBUTIONS
American will make scheduled payments of principal and interest on the
Owned Aircraft Notes to the Loan Trustee under the related Indenture, and the
Loan Trustee will distribute such payments to the Trustee for each Trust that
holds such Owned Aircraft Notes.
Upon the commencement of the Lease for any Leased Aircraft, American will
make scheduled rental payments for each Leased Aircraft under the related Lease,
and these scheduled rental payments will be assigned under the applicable
Indenture by the related Owner Trustee to the Loan Trustee to provide the funds
necessary to make the corresponding scheduled payments of principal and interest
due on the Leased Aircraft Notes issued by such Owner Trustee. The Loan Trustee
will distribute such payments to the Trustee for each Trust that holds such
Leased Aircraft Notes. After the Loan Trustee has distributed such payments of
principal and interest on the Leased Aircraft Notes to the Trustee for such
Trusts, the Loan Trustee will, except under certain circumstances, pay the
remaining balance, if any, to the Owner Trustee for the benefit of the related
Owner Participant.
Subject to the effect of any cross-subordination provisions set forth in
the applicable Prospectus Supplement, payments of principal, premium, if any,
and interest with respect to the Equipment Notes held in each Trust will be
distributed by the Trustee, upon receipt, to Certificateholders of such Trust on
the dates and in the currency specified in the applicable Prospectus Supplement,
except in certain cases when some or all of such Equipment Notes are in default
as described in the applicable Prospectus Supplement.
Payments of principal of and interest on the Equipment Notes held in each
Trust will be scheduled to be received by the Trustee on the dates specified in
the applicable Prospectus Supplement (such scheduled payments of principal and
interest are referred to as "Scheduled Payments," and the dates specified in the
applicable Prospectus Supplement for distribution of Scheduled Payments by the
Trustee to the Certificateholders are referred to as "Regular Distribution
Dates"). Subject to the effect of any cross-subordination provisions set forth
in the applicable Prospectus Supplement, the Pass Through Trustee will
distribute on each Regular Distribution Date to the related Certificateholders
any Scheduled Payments received by the Pass Through Trustee on such Regular
Distribution Date. If a Scheduled Payment is not received by the Pass Through
Trustee on or before a Regular Distribution Date, but is received within five
days thereafter, it will be distributed on the date received to the
Certificateholders. Each such distribution of a Scheduled Payment will be made
by the Pass Through Trustee to the people or entities in whose names the
Certificates of such Trust are registered at the close of business on the 15th
day preceding such Regular Distribution Date, subject to certain exceptions.
Subject to the effect of any cross-subordination provisions set forth in the
applicable Prospectus Supplement, each Certificateholder of a Trust will be
entitled to receive a pro rata share of any distribution in respect of Scheduled
Payments of principal and interest made on the Equipment Notes held in such
Trust.
Payments of principal, premium, if any, and interest received by the
Trustee on account of the early redemption or purchase, if any, of any of the
Equipment Notes relating to one or more Aircraft held in a Trust, payments
received by the Trustee following an Event of Default in respect of any such
Equipment Notes (including payments received by the Trustee on account of the
sale of such Equipment Notes by the Trustee or payments received by the Trustee
with respect to the Leased Aircraft Notes on account of the purchase of such
Notes by the related Owner Trustee or Owner Participant) and any other payments
designated as Special
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Payments in the applicable Trust Supplement ("Special Payments") will be
distributed on the date or dates determined as described in the applicable
Prospectus Supplement (each, a "Special Distribution Date"). The Trustee will
mail notice to the Certificateholders of record of the applicable Trust stating
any such anticipated Special Distribution Date.
If any Regular Distribution Date or Special Distribution Date is not a
business day, distributions scheduled to be made on such Regular Distribution
Date or Special Distribution Date may be made on the next succeeding business
day without additional interest.
POOL FACTORS
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Balance" for each Trust indicates, as of any date, the original aggregate
face amount of the Pass Through Certificates of such Trust less the aggregate
amount of all payments made in respect of the Pass Through Certificates of such
Trust other than payments made in respect of interest or premium or
reimbursement of any costs and expenses in connection therewith. The Pool
Balance for each Trust as of any Regular Distribution Date or Special
Distribution Date will be computed after giving effect to the payment of
principal, if any, on the Equipment Notes or other Trust Property held in such
Trust and the distribution thereof to be made on that date.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Factor" for each Trust as of any Regular Distribution Date or Special
Distribution Date is the quotient (rounded to the seventh decimal place)
computed by dividing (1) the Pool Balance, by (2) the aggregate original face
amount of the Pass Through Certificates of such Trust. The Pool Factor for each
Trust as of any Regular Distribution Date or Special Distribution Date shall be
computed after giving effect to the payment of principal, if any, on the
Equipment Notes or other Trust Property held in such Trust and the distribution
thereof to be made on that date. The Pool Factor for each Trust will initially
be 1.0000000; thereafter, the Pool Factor for each Trust will decline as
described above to reflect reductions in the Pool Balance of such Trust. The
amount of a Certificateholder's pro rata share of the Pool Balance of a Trust
can be determined by multiplying the original denomination of the
Certificateholder's Pass Through Certificate of such Trust by the Pool Factor
for such Trust as of the applicable Regular Distribution Date or Special
Distribution Date. The Pool Factor and the Pool Balance for each Trust will be
mailed to Certificateholders of such Trust on each Regular Distribution Date and
Special Distribution Date.
Unless there has been an early redemption, a purchase of one or more of the
Equipment Notes held in a Trust by the related Owner Trustee or Owner
Participant after an Indenture Default (as defined below), a default in the
payment of principal in respect of one or more issues of the Equipment Notes
held in a Trust or certain actions have been taken following a default thereon,
as described in the applicable Prospectus Supplement, the Pool Factor for each
Trust will decline in proportion to the scheduled repayments of principal on the
Equipment Notes held in such Trust as described in the applicable Prospectus
Supplement. In the event of such redemption, purchase or payment default (if
such payment is not made within five days of the Regular Distribution Date), the
Pool Factor and the Pool Balance of each Trust so affected will be recomputed
after giving effect thereto, and notice thereof will be mailed to
Certificateholders of such Trust. Each Trust will have a separate Pool Factor.
REPORTS TO CERTIFICATEHOLDERS
On each Regular Distribution Date and Special Distribution Date, the
Trustee will include with each distribution of a Scheduled Payment or Special
Payment to Certificateholders of the related Trust a statement, giving effect to
such distribution to be made on such Regular Distribution Date or Special
Distribution Date, setting forth the following information (per $1,000 in
aggregate principal amount of Pass Through Certificates for such Trust, as to
(1) and (2) below):
(1) the amount of such distribution allocable to principal and the
amount allocable to premium if any;
(2) the amount of such distribution allocable to interest;
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(3) the Pool Balance and the Pool Factor for such Trust; and
(4) such additional or different information as may be described in
the applicable Prospectus Supplement.
As long as the Pass Through Certificates are registered in the name of
Cede, as nominee for DTC, on the record date prior to each Regular Distribution
Date and Special Distribution Date, the Trustee will request from DTC a
securities position listing setting forth the names of all DTC Participants
reflected on DTC's books as holding interests in the Pass Through Certificates
on such record date. On each Regular Distribution Date and Special Distribution
Date, the applicable Trustee will mail to each such DTC Participant the
statement described above and will make available additional copies as requested
by such DTC Participant for forwarding to Certificate Owners.
In addition, after the end of each calendar year, the Trustee will prepare
for each Certificateholder of each Trust at any time during the preceding
calendar year a report containing the sum of the amounts determined pursuant to
clauses (1) and (2) above with respect to the Trust for such calendar year or,
in the event such person was a Certificateholder during only a portion of such
calendar year, for the applicable portion of such calendar year, and such other
items as are readily available to the Trustee and which a Certificateholder will
reasonably request as necessary for the purpose of such Certificateholder's
preparation of its federal income tax returns. Such report and such other items
will be prepared on the basis of information supplied to the Trustee by the DTC
Participants and will be delivered by the Trustee to such DTC Participants to be
available for forwarding by such DTC Participants to Certificate Owners in the
manner described above.
At such time, if any, as the Pass Through Certificates are issued in the
form of Definitive Certificates, the Trustee will prepare and deliver the
information described above to each Certificateholder of record of each Trust as
the name and period of record ownership of such Certificateholder appears on the
records of the registrar of the Pass Through Certificates.
VOTING OF EQUIPMENT NOTES
Subject to the effect of any cross-subordination or intercreditor
provisions described in the related Prospectus Supplement, the Trustee, as
holder of the Equipment Notes held in a Trust, has the right to vote and give
consents and waivers in respect of such Equipment Notes under the related
Indentures. The Basic Agreement and related Trust Supplement will set forth:
- the circumstances in which the Trustee may direct any action or cast any
vote as the holder of the Equipment Notes held in the applicable Trust at
its own discretion;
- the circumstances in which the Trustee will seek instructions from the
Certificateholders of such Trust; and
- if applicable, the percentage of Certificateholders required to direct
the Trustee to take any such action.
If specified in the related Prospectus Supplement, the right of a Trustee to
vote and give consents and waivers with respect to the Equipment Notes held in
the related Trust may, in the circumstances set forth in an intercreditor,
subordination or similar agreement to be executed by such Trustee, be
exercisable by another person specified in such Prospectus Supplement.
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
The Basic Agreement defines an "Event of Default" for any Trust as the
occurrence and continuance of an Indenture event of default under one or more of
the related Indentures. What constitutes an "Event of Default" for any
particular Trust, however, may be varied by the applicable Trust Supplement and
described in the applicable Prospectus Supplement. In addition, the Prospectus
Supplement will specify the events of default under the related Indentures (an
"Indenture Default"). The Indenture Defaults in the case of Leased Aircraft
Indentures will include events of default under the related Leases (a "Lease
Event of Default").
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With respect to any Equipment Notes that are supported by a liquidity facility
or like arrangement, the Indenture Defaults or Events of Default may include
events of default under such liquidity facility or arrangement.
Unless otherwise provided in a Prospectus Supplement, all of the Equipment
Notes issued under the same Indenture will relate only to a specific Aircraft
and there will be no cross-collateralization or cross-default provisions in the
Indentures. As a result, events resulting in an Indenture Default under any
particular Indenture will not necessarily result in an Indenture Default under
any other Indenture. However, since the Equipment Notes issued under any single
Indenture may be held in more than one Trust, a continuing Indenture Event of
Default under such single Indenture could result in an Event of Default in
respect of each such Trust. If an Indenture Default occurs in fewer than all of
the Indentures related to a Trust, notwithstanding the treatment of Equipment
Notes issued under those Indentures under which an Indenture Default has
occurred, payments of principal and interest on the Equipment Notes issued
pursuant to the Indentures with respect to which an Indenture Default has not
occurred will continue to be made as originally scheduled and distributed to
Certificateholders, subject to the terms of any intercreditor, subordination or
similar arrangements applicable to such Trust.
The ability of the applicable Owner Trustee or Owner Participant under a
Leased Aircraft Indenture to cure Indenture Defaults, including an Indenture
Default that results from the occurrence of a Lease Event of Default under the
related Lease, will be described in the Prospectus Supplement. Unless otherwise
provided in a Prospectus Supplement, in the case of any Pass Through
Certificates or Equipment Notes entitled to the benefits of a liquidity facility
or like arrangement, a drawing under any such liquidity facility or arrangement
for the purpose of making a payment of interest as a result of the failure by
American to have made a corresponding payment will not cure an Indenture Default
related to such failure by American.
The ability of the holders of the Pass Through Certificates issued with
respect to any one Trust to cause the Loan Trustee with respect to any Equipment
Notes held in such Trust to accelerate the payment of such Equipment Notes under
the applicable Indenture or to direct the exercise of remedies by such Loan
Trustee under the applicable Indenture will depend, in part, upon the proportion
of the aggregate principal amount of the Equipment Notes outstanding under such
Indenture and held in such Trust to the aggregate principal amount of all
Equipment Notes outstanding under such Indenture. In addition, if
cross-subordination provisions are applicable to any series of Pass Through
Certificates, then the ability of the Certificateholders of any one Trust
holding Equipment Notes issued under an Indenture to cause the Loan Trustee to
accelerate such Equipment Notes or to direct the exercise of remedies by the
Loan Trustee under such Indenture will depend, in part, upon the relative
ranking of the Equipment Notes held in such Trust.
Each Trust will hold Equipment Notes with different terms than the
Equipment Notes held in the other Trusts and therefore the Certificateholders of
each Trust may have divergent or conflicting interests from those of the
Certificateholders of those other Trusts holding Equipment Notes issued under
the same Indenture. In addition, as long as the same institution acts as Trustee
of each Trust, in the absence of instructions from the Certificateholders of any
such Trust, the Trustee for such Trust could for the same reason be faced with a
potential conflict of interest upon an Indenture Default. In such event, the
initial Trustee has indicated that it would likely resign as Trustee of one or
all such Trusts, and a successor trustee or successor trustees would be
appointed in accordance with the terms of the Basic Agreement.
The Prospectus Supplement for a series of Pass Through Certificates will
specify whether and under what circumstances the Trustee may or will sell for
cash to any person all or part of the Equipment Notes held in the related Trust.
The right to make any such sale may be exercisable by a person other than the
Trustee in the event that the applicable series of Pass Through Certificates are
subject to any intercreditor, subordination or similar arrangements, and the
proceeds or any such sale will be distributed as contemplated by such
arrangements. Any proceeds received by the Trustee upon any such sale that are
distributable to the Certificateholders of such Trust will be deposited in an
account established by the Trustee for the benefit of the Certificateholders of
such Trust and will be distributed to the Certificateholders of such Trust on a
Special Distribution Date. The market for Equipment Notes in default may be very
limited and there can be no assurance that they could be sold for a reasonable
price. Furthermore, as long as the same institution acts as
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Trustee of multiple Trusts, it may be faced with a conflict in deciding from
which Trust to sell Equipment Notes to available buyers. If the Trustee sells
any such Equipment Notes with respect to which an Indenture Default exists for
less than their outstanding principal amount, the Certificateholders of such
Trust will receive a smaller amount of principal distributions than anticipated
and will not have any claim for the shortfall against American, the Trustee or
any other person, including, in the case of any Leased Aircraft, the related
Owner Trustee or Owner Participant. Neither the Trustee nor the
Certificateholders of such Trust, furthermore, could take any action with
respect to any remaining Equipment Notes held in such Trust as long as no
Indenture Defaults existed with respect thereto.
Any amount, other than Scheduled Payments received on a Regular
Distribution Date or within five days thereafter, distributed to the Trustee of
any Trust by the Loan Trustee under any Indenture on account of the Equipment
Notes held in such Trust following an Indenture Default under such Indenture
will be deposited in the special payments account for such Trust and will be
distributed to the Certificateholders of such Trust on a Special Distribution
Date. In addition, if an Indenture provides that the applicable Owner Trustee or
Owner Participant may, under circumstances specified therein, redeem or purchase
some or all of the outstanding Equipment Notes issued under such Indenture, the
price paid by such Owner Trustee or Owner Participant to the Trustee of any
Trust for any of the Equipment Notes issued under such Indenture and held in
such Trust will be deposited in the special payments account for such Trust and
will be distributed to the Certificateholders of such Trust on a Special
Distribution Date.
Any funds representing payments received with respect to any Equipment
Notes held in a Trust and which are in default, or the proceeds from the sale by
the Trustee of any such Equipment Notes, held by the Trustee in the special
payments account for such Trust will, to the extent practicable, be invested and
reinvested by the Trustee in Permitted Investments pending the distribution of
such funds on a Special Distribution Date. "Permitted Investments" will be
described in the related Prospectus Supplement.
The Basic Agreement provides that the Trustee of each Trust will, within 90
days after the occurrence of a default (as defined below) in respect of such
Trust, give to the Certificateholders of such Trust notice, transmitted by mail,
of all uncured or unwaived defaults with respect to such Trust known to it;
provided that, except in the case of default in the payment of principal of,
premium, if any, or interest on any of the Equipment Notes held in such Trust,
the Trustee will be protected in withholding such notice if it in good faith
determines that the withholding of such notice is in the interests of such
Certificateholders. Except as otherwise described in the applicable Prospectus
Supplement, the term "default," for the purpose of the provision described in
this paragraph only, means the occurrence of any Event of Default with respect
to a Trust, as specified above, except that in determining whether any such
Event of Default has occurred, any grace period or notice in connection
therewith will be disregarded.
The Basic Agreement contains a provision entitling the Trustee of each
Trust, subject to the duty of the Trustee during a default to act with the
required standard of care, to be offered reasonable security or indemnity by the
Certificateholders of such Trust before proceeding to exercise any right or
power under the Basic Agreement at the request of such Certificateholders.
The applicable Prospectus Supplement will specify the percentage of
Certificateholders entitled to waive, or to instruct the Trustee to waive, any
past default or Event of Default with respect to such Trust and its consequences
and also will specify the percentage of Certificateholders (and whether of such
Trust or of any other Trust holding Equipment Notes issued under related
Indentures) entitled to waive, or to instruct the Trustee or the Loan Trustee to
waive, any past Indenture Default under any related Indenture and thereby annul
any direction given with respect thereto.
MODIFICATIONS OF THE BASIC AGREEMENT
The Basic Agreement contains provisions permitting American and the Trustee
to enter into a supplement to the Basic Agreement or, if applicable, to any Note
Purchase Agreement or to any intercreditor,
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subordination or like agreement or liquidity facility, without the consent of
the holders of any of the Pass Through Certificates, to, among other things:
(1) provide for the formation of a Trust and the issuance of a series
of Pass Through Certificates;
(2) evidence the succession of another corporation or entity to
American and the assumption by such corporation or entity of American's
obligations under the Basic Agreement and any Trust Supplement, any Note
Purchase Agreement and any intercreditor, subordination or like agreement
or liquidity facility;
(3) add to the covenants of American for the benefit of the holders of
a series of Pass Through Certificates or surrender any right or power
conferred upon American in the Basic Agreement, any Note Purchase Agreement
or any intercreditor, subordination or like agreement or liquidity
facility;
(4) cure any ambiguity or correct any mistake or inconsistency
contained in the Basic Agreement, any Trust Supplement or any intercreditor
agreement or liquidity facility;
(5) make or modify any other provisions with respect to matters or
questions arising under the Basic Agreement or any Trust Supplement or any
intercreditor, subordination or like agreement or liquidity facility as the
Company may deem necessary or desirable and that will not materially
adversely affect the interests of the holders of the series of Pass Through
Certificates issued under such Trust Supplement;
(6) comply with any requirement of the Commission, any applicable law,
rules or regulations of any exchange or quotation system on which any Pass
Through Certificates may be listed or of any regulatory body;
(7) modify, eliminate or add to the provisions of the Basic Agreement
or any intercreditor, subordination or like agreement or liquidity facility
to the extent necessary to continue the qualification of the Basic
Agreement (including any supplemental agreement) or any such agreement or
facility under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act") and add to the Basic Agreement or any intercreditor,
subordination or like agreement or liquidity facility such other provisions
as may be expressly permitted by the Trust Indenture Act;
(8) provide for a successor Trustee for some or all of the Trusts or
add to or change any provision of the Basic Agreement or any intercreditor,
subordination or like agreement or liquidity facility as necessary to
facilitate the administration of the Trusts thereunder by more than one
Trustee;
(9) provide certain information to the Trustee as required in the
Basic Agreement;
(10) add to or change the Basic Agreement and any Trust Supplement to
facilitate the issuance of any Pass Through Certificates in bearer form or
to facilitate or provide for the issuance of any Pass Through Certificates
in global form in addition to or in place of Pass Through Certificates in
certificated form;
(11) provide for the delivery of Pass Through Certificates or any
supplement to the Basic Agreement in or by means of any computerized,
electronic or other medium, including computer diskette;
(12) correct or supplement the description of any property of any
Trust;
(13) modify, eliminate or add to the provisions of the Basic Agreement
or any applicable Trust Supplement to reflect the substitution of a
substitute aircraft for any Aircraft; and
(14) make any other amendments or modifications to the Basic
Agreement, provided such amendments or modifications will only apply to
Pass Through Certificates of one or more series to be issued thereafter.
The Basic Agreement also contains provisions permitting American and the
Trustee of each Trust, with the consent of the Certificateholders of such Trust
evidencing fractional undivided interests aggregating not less than a majority
in interest of such Trust and, in the case of Leased Aircraft, with the consent
of the Owner
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Trustee, to execute supplemental agreements adding any provisions to or changing
or eliminating any of the provisions of the Basic Agreement, to the extent
relating to such Trust, the applicable Trust Supplement or any applicable
intercreditor, subordination or like agreement or liquidity facility, or
modifying the rights of such Certificateholders, except that no such
supplemental agreement may, without the consent of the holder of each such Pass
Through Certificate so affected, (a) reduce in any manner the amount of, or
delay the timing of, any receipt by the Trustee of payments on the Equipment
Notes held in such Trust, or distributions in respect of any Pass Through
Certificate of such Trust, or change any date or place of payment or change the
coin or currency in which such Pass Through Certificate is payable, other than
that provided for in such Pass Through Certificate, or impair the right of any
Certificateholder of such Trust to institute suit for the enforcement of any
such payment when due, (b) permit the disposition of any Equipment Note held in
such Trust, except as provided in the Basic Agreement or the applicable Trust
Supplement or in any intercreditor, subordination or like agreement or liquidity
facility, (c) alter the priority of distributions specified in the relevant
intercreditor agreement, if any, in a manner materially adverse to the holders
of Pass Through Certificates of such series, or (d) reduce the percentage of the
aggregate fractional undivided interests of the Trust provided for in the Basic
Agreement or the applicable Trust Supplement, the consent of the holders of
which is required for any such supplemental agreement or for any waiver provided
for in the Basic Agreement or such Trust Supplement.
MODIFICATION OF INDENTURE AND RELATED AGREEMENTS
The Prospectus Supplement will specify the Trustee's obligations in the
event that the Trustee, as the holder of any Equipment Notes held in a Trust,
receives a request for its consent to any amendment or modification of or waiver
under the Indenture or other documents relating to such Equipment Notes
(including any Lease with respect to Leased Aircraft Notes).
TERMINATION OF THE TRUSTS
The obligations of American and the Trustee with respect to a Trust will
terminate upon the distribution to Certificateholders of such Trust of all
amounts required to be distributed to them pursuant to the Basic Agreement and
the applicable Trust Supplement and the disposition of all property held in such
Trust. The Trustee will mail to each Certificateholder of record of such Trust
notice of the termination of such Trust, the amount of the proposed final
payment and the proposed date for the distribution of such final payment for
such Trust. The final distribution to any Certificateholder of such Trust will
be made only upon surrender of such Certificateholder's Pass Through
Certificates at the office or agency of the Trustee specified in such notice of
termination.
DELAYED PURCHASE OF EQUIPMENT NOTES
In the event that, on the issuance date of any Pass Through Certificates,
all of the proceeds from the sale of such Pass Through Certificates are not used
to purchase the Equipment Notes contemplated to be held in the related Trust,
such Equipment Notes may be purchased by the Trustee at any time on or prior to
the date specified in the applicable Prospectus Supplement. In such event, the
proceeds from the sale of such Pass Through Certificates not used to purchase
Equipment Notes will be held under an arrangement described in the applicable
Prospectus Supplement. Such an arrangement may include, without limitation, (1)
the investment of such proceeds by the Trustee in specified permitted
investments; (2) the deposit of such proceeds in a deposit or escrow account
held by a separate depositary or escrow agent; (3) the purchase by the Trustee
of debt instruments issued on an interim basis by American; or (4) the purchase
of Leased Aircraft Notes or Owned Aircraft Notes issued prior to the purchase of
Leased Aircraft or the delivery of Owned Aircraft, as the case may be. Any such
debt instrument may be secured by a collateral account or other security or
property described in the applicable Prospectus Supplement. The arrangements
with respect to the payment of interest on funds so held will be described in
the applicable Prospectus Supplement. If any such proceeds are not subsequently
utilized to purchase Equipment Notes by the relevant date specified in the
applicable Prospectus Supplement, including by reason of a casualty to one or
more Aircraft, such proceeds will be returned to the holders of such Pass
Through Certificates.
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MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
American will be prohibited from consolidating with or merging into any
other corporation or transferring substantially all of its assets as an entirety
to any other corporation or entity unless, in the case of a merger or
consolidation where American is not the surviving corporation or in the case of
the transfer of substantially all of American's assets, the successor
corporation or transferee corporation or entity shall be a corporation or entity
organized and existing under the laws of the United States or any State or the
District of Columbia and shall expressly assume all the obligations of American
contained in the Basic Agreement.
THE TRUSTEE
Unless otherwise provided in the Prospectus Supplement for any series of
Pass Through Certificates, State Street Bank and Trust Company of Connecticut,
National Association, will be the Trustee for each of the Trusts. With certain
exceptions, the Trustee will make no representations as to the validity or
sufficiency of the Basic Agreement, the Trust Supplements, the Pass Through
Certificates, the Equipment Notes, the Indentures, the Leases, if any, or other
related documents. The Trustee will not be liable with respect to any series of
Pass Through Certificates for any action taken or omitted to be taken by it in
good faith in accordance with the direction of the holders of a majority in face
amount of outstanding Pass Through Certificates of such series issued under the
Basic Agreement. Subject to such provisions, such Trustee will be under no
obligation to exercise any of its rights or powers under the Basic Agreement at
the request of any holders of Pass Through Certificates issued thereunder unless
they have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by the Trustee in
exercising such rights or powers. The Basic Agreement provides that the Trustee
in its individual or any other capacity may acquire and hold Pass Through
Certificates issued thereunder and, subject to certain conditions, may otherwise
deal with American and, with respect to the Leased Aircraft, with any Owner
Trustee and Owner Participant with the same rights it would have if it were not
the Trustee.
Unless otherwise provided in the Prospectus Supplement for any series of
Pass Through Certificates, State Street Bank and Trust Company of Connecticut,
National Association, will also be the Loan Trustee of the Indentures under
which the Equipment Notes are issued. It also serves as indenture trustee and as
pass through trustee in numerous other aircraft financing transactions involving
American.
The Trustee may resign with respect to any or all of the Trusts at any
time, in which event American will be obligated to appoint a successor trustee.
If the Trustee ceases to be eligible to continue as Trustee with respect to a
Trust or becomes incapable of acting as Trustee or becomes insolvent, American
may remove such Trustee, or any holder of Pass Through Certificates of such
Trust for at least six months may, on behalf of itself and all others similarly
situated, petition any court of competent jurisdiction for the removal of such
Trustee and the appointment of a successor trustee. Any resignation or removal
of the Trustee with respect to a Trust and appointment of the successor trustee
for such Trust does not become effective until acceptance of the appointment by
the successor trustee. Pursuant to such resignation and successor trustee
provisions, it is possible that a different trustee could be appointed to act as
the successor trustee with respect to each Trust. All references in this
Prospectus to the Trustee are to the trustee acting in such capacity under each
of the Trusts and should be read to take into account the possibility that each
of the Trusts could have a different successor trustee in the event of such a
resignation or removal.
The Basic Agreement provides that American will pay the Trustee's fees and
expenses and indemnify the Trustee against certain liabilities. In certain
circumstances, the Trustee will have a priority claim on the related Trust
Property to the extent such fees, expenses or indemnities are not paid.
DESCRIPTION OF THE EQUIPMENT NOTES
The following description is a summary of certain terms that we expect will
be common to all Equipment Notes. Where no distinction is made between the
Leased Aircraft Notes and the Owned Aircraft Notes or between their respective
Indentures, such statements refer to any Equipment Notes and any Indenture. Most
of the financial terms and other specific terms of any series of Equipment Notes
will be described in a
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Prospectus Supplement to be attached to this Prospectus. Since the terms of the
specific Equipment Notes may differ from the general information provided below,
you should rely on the information in the Prospectus Supplement instead of the
information in this Prospectus if the information in the Prospectus Supplement
is different from the information below.
Because the following description is a summary, it does not describe every
aspect of the Equipment Notes, and it is subject to and qualified in its
entirety by reference to all the provisions of the applicable Equipment Notes,
Indentures, Leases, Note Purchase Agreements, trust agreements, participation
agreements, intercreditor and subordination agreements, liquidity facility
arrangements and other agreements and arrangements relating to any series of
Equipment Notes.
Additional provisions with respect to the Equipment Notes and the
associated aircraft financing transactions will be described in the applicable
Prospectus Supplement. To the extent that any provision in any Prospectus
Supplement is inconsistent with any provision in this summary, the provision in
such Prospectus Supplement will control.
GENERAL
The Equipment Notes will be issued under Indentures between (a) in the case
of Owned Aircraft Notes, the related Loan Trustee and American or (b) in the
case of Leased Aircraft Notes, the related Loan Trustee and the Owner Trustee of
a trust for the benefit of the Owner Participant who is the beneficial owner of
such Leased Aircraft.
American's obligations under each Indenture relating to an Owned Aircraft
and under the related Owned Aircraft Notes will be direct obligations of
American. All of the Owned Aircraft Notes issued under the same Indenture will
relate to, and will be secured by, one or more specific Owned Aircraft and,
unless otherwise specified in the applicable Prospectus Supplement, will not be
secured by any other Aircraft.
The Leased Aircraft Notes will be nonrecourse obligations of the Owner
Trustee. All of the Leased Aircraft Notes issued under the same Indenture will
relate to and will be secured by one or more specific Leased Aircraft and,
unless otherwise specified in the applicable Prospectus Supplement, will not be
secured by any other Aircraft. In each case, the Owner Trustee will lease the
related Leased Aircraft to American pursuant to a separate Lease between such
Owner Trustee and American.
Equipment Notes may be issued pursuant to delayed aircraft financing
arrangements, such as the following:
- The Owner Trustee may issue Leased Aircraft Notes prior to the purchase
of certain Leased Aircraft by such Owner Trustee or the commencement of
the related Leases.
- American may issue Owned Aircraft Notes prior to the expected delivery
date of certain Owned Aircraft.
The applicable Prospectus Supplement will describe any such delayed
aircraft financing arrangements, including any arrangements for the
collateralization of any such Leased Aircraft Notes or Owned Aircraft Notes with
cash, permitted investments or other property, and any depositary or escrow
arrangement pursuant to which the proceeds from the sale of such Leased Aircraft
Notes or Owned Aircraft Notes will be deposited with a third party depositary or
escrow agent.
If the anticipated aircraft financing transactions have not been completed
by the relevant date specified in the applicable Prospectus Supplement,
including by reason of a casualty to one or more Aircraft, such Leased Aircraft
Notes or Owned Aircraft Notes will be prepaid at the price specified in such
Prospectus Supplement. Alternatively, if the Lease related to any such Leased
Aircraft Notes has not commenced by such relevant date, if so specified in the
applicable Prospectus Supplement, American at its option may convert the
proposed leveraged lease financing into a type of financing available for Owned
Aircraft and such Leased Aircraft Notes (with certain modifications) will become
Owned Aircraft Notes.
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Upon the commencement of the Lease for any Leased Aircraft, American will
be obligated to make or cause to be made rental payments under such Lease that
will be sufficient to pay the principal of and accrued interest on the related
Leased Aircraft Notes when due, subject to some limited exceptions. The Leased
Aircraft Notes will not be direct obligations of, or guaranteed by, American.
American's rental obligations under each Lease, however, will be general
obligations of American.
If specified in a Prospectus Supplement, American will have the right (a)
to arrange a sale and leaseback of one or more Owned Aircraft referred to in
such Prospectus Supplement and the assumption, on a non-recourse basis, of the
related Owned Aircraft Notes by an Owner Trustee or (b) to substitute other
aircraft, cash or U.S. government securities or a combination thereof in place
of the Owned Aircraft securing the related Owned Aircraft Notes. The terms and
conditions of any such sale and leaseback or substitution will be described in
the applicable Prospectus Supplement.
PRINCIPAL AND INTEREST PAYMENTS
Interest received by the Trustee on the Equipment Notes held in each Trust
will be passed through to the Certificateholders of such Trust on the dates and
at the rate per annum set forth in the applicable Prospectus Supplement until
the final distribution date for such Trust. The Equipment Notes may bear
interest at a fixed or a floating rate or may be issued at a discount. Principal
payments received by the Trustee on the Equipment Notes held in each Trust will
be passed through to the Certificateholders of such Trust in scheduled amounts
on the dates set forth in the applicable Prospectus Supplement until the final
distribution date for such Trust. Payments on the Equipment Notes, and
distributions to Certificateholders, may be subject to the terms of any
intercreditor, subordination or similar agreement or arrangement.
If any date scheduled for any payment of principal of, premium, if any, or
interest on the Equipment Notes is not a business day, such payment may be made
on the next succeeding business day without any additional interest, unless
otherwise provided in the applicable Prospectus Supplement.
REDEMPTION
The applicable Prospectus Supplement will describe the circumstances,
whether voluntary or involuntary, under which the related Equipment Notes will
or may be redeemed or purchased prior to the stated maturity thereof, whether in
whole or in part, the premium, if any, applicable to certain redemptions or
purchases and other terms applying to such redemptions or purchases.
SECURITY
The Owned Aircraft Notes will be secured by a security interest granted by
American to the related Loan Trustee of all of American's right, title and
interest in and to the Owned Aircraft. Under the terms of each Owned Aircraft
Indenture, American will be obligated, among other things, to pay all costs of
operating and maintaining such Aircraft.
The Leased Aircraft Notes will be secured by:
- an assignment by the related Owner Trustee to the related Loan Trustee of
such Owner Trustee's rights (except for certain limited rights, including
those described below) under the Lease or Leases with respect to the
related Leased Aircraft, including the right to receive payments of rent
thereunder; and
- a security interest granted by such Owner Trustee to such Loan Trustee in
such Aircraft, subject to the rights of American under such Lease or
Leases, and other property or rights, if any, described in the applicable
Prospectus Supplement.
Unless and until an Indenture Default with respect to a Leased Aircraft has
occurred and is continuing, the Loan Trustee may exercise only limited rights of
the Owner Trustee under the related Lease. The assignment by the Owner Trustee
to the Loan Trustee of its rights under the related Lease will exclude, among
other things, rights of such Owner Trustee and the related Owner Participant
relating to indemnifica-
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tion by American for certain matters, insurance proceeds payable to such Owner
Trustee in its individual capacity and to such Owner Participant under liability
insurance maintained by American under such Lease or by such Owner Trustee or
such Owner Participant, insurance proceeds payable to such Owner Trustee in its
individual capacity or to such Owner Participant under certain casualty
insurance maintained by such Owner Trustee or such Owner Participant, any rights
of such Owner Participant or such Owner Trustee to enforce payment of the
foregoing amounts and certain reimbursement payments made by American to such
Owner Trustee.
American's obligations in respect of each Leased Aircraft will be those of
a lessee under a "net lease." Accordingly, American will be obligated, among
other things, to pay all costs of operating and maintaining such Aircraft.
The Prospectus Supplement will describe the required insurance coverage
with respect to the Aircraft.
Unless otherwise specified in the applicable Prospectus Supplement, the
Equipment Notes will not be cross-collateralized and consequently the Equipment
Notes issued in respect of any one Aircraft will not be secured by any of the
other Aircraft (or any of the other security related thereto, including, in the
case of Leased Aircraft Notes, the Lease related to any other Aircraft).
Unless otherwise specified in the applicable Prospectus Supplement,
American will be required, except under certain circumstances, to keep each
Aircraft registered under the portion of Title 49 of the United States Code
relating to aviation (the "Transportation Code") and to record the Indenture and
the Lease, if any, with respect to each Aircraft under the Transportation Code.
Such recordation of the Indenture and the Lease, if any, with respect to each
Aircraft will give the related Loan Trustee a perfected security interest in the
related Aircraft whenever it is located in the United States or any of its
territories and possessions and, with certain exceptions, in those jurisdictions
that have ratified or adhere to the Convention on the International Recognition
of Rights in Aircraft (the "Convention"). American or any lessee will have the
right, subject to certain conditions, at its own expense to register each
Aircraft in countries other than the United States. Each Aircraft may also be
operated by American or under lease or sublease or interchange arrangements in
countries that are not parties to the Convention. The extent to which the
related Loan Trustee's security interest would be recognized in an Aircraft
located in a country that is not a party to the Convention, and the extent to
which such security interest would be recognized in a jurisdiction adhering to
the Convention if the Aircraft is registered in a jurisdiction not a party to
the Convention, is uncertain. Moreover, in the case of an Indenture Default, the
ability of the related Loan Trustee to realize upon its security interest in an
Aircraft is likely to be adversely affected as a legal or practical matter if
such Aircraft were registered or located outside the United States.
Funds, if any, held from time to time by the Loan Trustee with respect to
any Aircraft, including funds held as the result of an Event of Loss to such
Aircraft or termination of the Lease, if any, relating thereto, will be invested
and reinvested by such Loan Trustee, at the direction of American (except, with
respect to a Leased Aircraft, in the case of a Lease Event of Default under the
applicable Lease or, with respect to an Owned Aircraft, in the case of an
Indenture Default under the applicable Indenture), in investments described in
the related Indenture. American will pay the amount of any net loss resulting
from any such investment directed by it.
Section 1110 of the U.S. Bankruptcy Code provides in relevant part that the
right of lessors, conditional vendors and holders of security interests with
respect to "equipment" (as defined in such Section 1110) to take possession of
such equipment in compliance with the lease, conditional sale contract or
security agreement, as the case may be, is not affected by (a) the automatic
stay provision of the U.S. Bankruptcy Code, which provision enjoins
repossessions by creditors for the duration of the reorganization period, (b)
the provision of the U.S. Bankruptcy Code allowing the debtor-in-possession or
the trustee to use, sell or lease property of the debtor during the
reorganization period, (c) Section 1129 of the U.S. Bankruptcy Code (which
governs the confirmation of plans of reorganization in Chapter 11 cases) or (d)
any power of the bankruptcy court to enjoin a repossession. Section 1110
provides that the right of a lessor, conditional vendor or holder of a security
interest to take possession of an aircraft in the event of an event of default
may not be exercised for 60 days following the date of commencement of the
reorganization proceedings (unless
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specifically permitted by the bankruptcy court) and may not be exercised at all
if, within such 60-day period (or such longer period consented to by the lessor,
conditional vendor or holder of a security interest), the debtor-in-possession
or the trustee agrees to perform the debtor's obligations that become due on or
after such date under the lease, conditional sale contract or security agreement
and cures all existing defaults thereunder (other than defaults resulting solely
from the financial condition, bankruptcy, insolvency or reorganization of the
debtor). "Equipment" is defined in Section 1110, in part, as an aircraft,
aircraft engine, propeller, appliance, or spare part (as defined in Section
40102 of Title 49 of the U.S. Code) that is subject to a security interest
granted by, leased to, or conditionally sold to a debtor that is a citizen of
the United States (as defined in Section 40102 of Title 49 of the U.S. Code)
holding an air carrier operating certificate issued by the Secretary of
Transportation pursuant to chapter 447 of Title 49 of the U.S. Code for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of cargo
(subject to certain limitations in the case of equipment first placed in service
on or prior to October 22, 1994). The Prospectus Supplement for each offering of
Pass Through Certificates will discuss the availability of Section 1110 with
respect to the related Aircraft.
ADDITIONAL NOTES
Under certain circumstances and conditions as described in the applicable
Prospectus Supplement, American may cause the financing of certain
modifications, alterations, additions, improvements or replacement parts to an
Aircraft through the issuance and sale by American, in the case of an Owned
Aircraft, or by the Owner Trustee, in the case of a Leased Aircraft, of
additional Equipment Notes (the "Additional Notes"). The terms, conditions and
designations of such Additional Notes will be set forth in a supplement to the
related Indenture.
PAYMENTS AND LIMITATION OF LIABILITY
Each Leased Aircraft will be leased by the related Owner Trustee to
American for a term expiring on a date not earlier than the latest maturity date
of the Leased Aircraft Notes issued with respect to such Leased Aircraft, unless
previously terminated as permitted by the terms of the related Lease. The basic
rent and certain other payments by American under each such Lease will be
assigned by the Owner Trustee under the related Indenture to the related Loan
Trustee to provide the funds necessary to pay principal of and interest due from
such Owner Trustee on the Leased Aircraft Notes issued under such Indenture. In
certain cases, the basic rent payments under a Lease may be adjusted, but each
Lease will provide that under no circumstances will basic rent payments by
American be less than the scheduled payments of principal and interest on the
related Leased Aircraft Notes. The balance of any basic rent payments under each
Lease, after payment of amounts due on the Leased Aircraft Notes issued under
the Indenture relating to such Lease, will be paid over to the related Owner
Trustee. American's obligation to pay rent and to cause other payments to be
made under each Lease will be general obligations of American.
Except when American purchases a Leased Aircraft and assumes the Leased
Aircraft Notes related thereto, the Leased Aircraft Notes will not be
obligations of, or guaranteed by, American. Neither the Owner Trustee nor the
Owner Participant nor the Loan Trustee will be personally liable to any holder
of any Leased Aircraft Notes for any amounts payable thereunder, or, except as
provided in the Indenture relating thereto in the case of the Owner Trustee and
the Loan Trustee, for any liability under such Indenture. Except when American
has assumed any Leased Aircraft Notes, all amounts payable under any Leased
Aircraft Notes (other than payments made in connection with an optional
redemption or purchase of Leased Aircraft Notes by the related Owner Trustee or
the related Owner Participant) will be made only from the assets subject to the
lien of the Indenture with respect to such Aircraft and their proceeds
(including rent payable by American under the Lease with respect to such Leased
Aircraft), or from any applicable liquidity facility or like arrangement.
American's obligations under each Owned Aircraft Indenture and under the
Owned Aircraft Notes will be general obligations of American.
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DEFEASANCE OF THE INDENTURES AND THE EQUIPMENT NOTES IN CERTAIN CIRCUMSTANCES
Unless otherwise specified in the applicable Prospectus Supplement, the
obligations under the applicable Indenture of, with respect to any Leased
Aircraft Notes, the related Owner Trustee or, with respect to any Owned Aircraft
Notes, American will be deemed to have been discharged (except for certain
obligations, including the obligations to register the transfer or exchange of
Equipment Notes, to replace stolen, lost, destroyed or mutilated Equipment Notes
and to maintain paying agencies and hold money for payment in trust) on the date
of irrevocable deposit with the related Loan Trustee of money or certain
obligations of the United States or any agency or instrumentality thereof the
payment of which is backed by the full faith and credit of the United States
which, through the payment of principal and interest in respect thereof in
accordance with their terms, will provide money in an aggregate amount
sufficient to pay when due (including as a consequence of redemption in respect
of which notice is given on or prior to the date of such deposit) principal of,
premium, if any, and interest on all Equipment Notes issued thereunder in
accordance with the terms of such Indenture. Such discharge may occur only if,
among other things, there has been published by the Internal Revenue Service a
ruling to the effect that holders of such Equipment Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amounts and in the same manner and at the same times as would have been
the case if such deposit, defeasance and discharge had not occurred.
Upon such defeasance, or upon payment in full of the principal of, premium,
if any, and interest on all Equipment Notes issued under any Indenture on the
maturity date therefor or deposit with the applicable Loan Trustee of money
sufficient therefor no earlier than one year prior to the date of such maturity,
the holders of such Equipment Notes will have no beneficial interest in or other
rights with respect to the related Aircraft or other assets subject to the lien
of such Indenture and such lien will terminate.
ASSUMPTION OF OBLIGATIONS BY AMERICAN
If specified in the applicable Prospectus Supplement with respect to any
Leased Aircraft, American may purchase such Leased Aircraft prior to the end of
the term of the related Lease and, in connection with such purchase, may assume
on a full recourse basis all of the obligations of the Owner Trustee (other than
its obligations in its individual capacity) under the Indenture with respect to
such Aircraft, including the obligations to make payments in respect of the
related Leased Aircraft Notes. In such event, certain relevant provisions of the
related Lease, including (among others) provisions relating to maintenance,
possession and use of the related Aircraft, liens, insurance and events of
default will be deemed to be incorporated into such Indenture, and the Leased
Aircraft Notes issued under such Indenture will continue to be outstanding and
secured by such Aircraft. The terms and conditions of any such assumption will
be described in the applicable Prospectus Supplement.
OWNER PARTICIPANT; REVISIONS TO AGREEMENTS
If specified in the applicable Prospectus Supplement, at the time Pass
Through Certificates are issued, American may still be seeking Owner
Participants with respect to the trusts relating to certain of the Aircraft.
American or an affiliate will hold the beneficial interest under the trust
agreement relating to each such Aircraft until the date upon which a prospective
Owner Participant commits to participate in the purchase price of such Aircraft.
Any outside limit on such date will be specified in the applicable Prospectus
Supplement. American or its affiliate will transfer to such Owner Participant on
such date American's or such affiliate's beneficial interest under such trust
agreement. Such prospective Owner Participants may request revisions to the
participation agreement, Lease, trust agreement and Indenture so that the terms
of such agreements applicable to these Aircraft may differ from the description
of such agreements contained in the applicable Prospectus Supplement. Such
Prospectus Supplement will describe the extent to which such terms can be varied
at the request of prospective Owner Participants.
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CREDIT ENHANCEMENTS
RANKING; CROSS-SUBORDINATION
Some of the Equipment Notes related to a specific Aircraft may be
subordinated and junior in right of payment to other Equipment Notes or other
debt related to the same or certain related Aircraft. In such event, the
applicable Prospectus Supplement will describe the terms of such subordination,
including the priority of distributions among such classes of Equipment Notes,
the ability of each such class of Equipment Notes to exercise remedies with
respect to the relevant Aircraft (and, if such Aircraft are Leased Aircraft, the
Leases) and certain other intercreditor terms and provisions.
The Equipment Notes issued under an Indenture may be held in more than one
Trust, and a Trust may hold Equipment Notes issued under more than one related
Indenture. Unless otherwise described in a Prospectus Supplement, however, only
Equipment Notes having the same priority of payment may be held in the same
Trust. A Trust that holds Equipment Notes that are junior in payment priority to
the Equipment Notes held in another related Trust formed as part of the same
offering of Pass Through Certificates as a practical matter will be subordinated
to such latter Trust. In addition, the Trustees on behalf of one or more Trusts
may enter into an intercreditor or subordination agreement that establishes
priorities among series of Pass Through Certificates or provides that
distributions on the Pass Through Certificates will be made to the
Certificateholders of a certain Trust or Trusts before they are made to the
Certificateholders of one or more other Trusts. For example, such an agreement
may provide that payments made to a Trust on account of a subordinate class of
Equipment Notes issued under one Indenture may be subordinated to the prior
payment of all amounts owing to Certificateholders of a Trust that holds senior
Equipment Notes issued under that Indenture or any related Indentures.
The applicable Prospectus Supplement will describe any such intercreditor
or subordination agreement or arrangements and the relevant cross-subordination
provisions. Such description will specify the percentage of Certificateholders
under any Trust that is permitted to (1) grant waivers of defaults under any
related Indenture, (2) consent to the amendment or modification of any related
Indenture or (3) direct the exercise of remedies under any related Indenture.
Payments made on account of the Pass Through Certificates of a particular series
also may be subordinated to the rights of the provider of any Liquidity Facility
described below.
LIQUIDITY FACILITY
The applicable Prospectus Supplement may provide that a "Liquidity
Facility" will support one or more payments of principal, premium, if any, or
interest on the Equipment Notes of one or more series, or one or more
distributions in respect of the Pass Through Certificates of one or more series.
A Liquidity Facility may include a letter of credit, a revolving credit
agreement, an insurance policy, surety bond or financial guaranty, or any other
type of agreement or arrangement for the provision of liquidity support. The
institution or institutions providing any Liquidity Facility will be identified
in the applicable Prospectus Supplement. Unless otherwise provided in the
applicable Prospectus Supplement, the provider of any Liquidity Facility will
have a senior claim on the assets securing the affected Equipment Notes and on
the Trust Property of the affected Trusts.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the principal federal income tax
consequences of the purchase, ownership and disposition of Pass Through
Certificates to a Certificate Owner that purchases Pass Through Certificates in
the initial offering thereof at the offering price set forth in the applicable
Prospectus Supplement and holds such Pass Through Certificates as capital
assets. This discussion should be read in conjunction with any additional
discussion of federal income tax consequences included in the applicable
Prospectus Supplement. The discussion is based on laws, regulations, rulings and
decisions in effect as of the date hereof, all of which are subject to change,
possibly with retroactive effect, or different interpretation. The discussion
does not address all of the federal income tax consequences that may be relevant
to all Certificate
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Owners in light of their particular circumstances (including, for example, any
special rules applicable to tax-exempt organizations, broker-dealers, insurance
companies and foreign investors). The statements of law and legal conclusion set
forth herein are based upon the opinion of Debevoise & Plimpton, counsel to
American. Persons considering an investment in the Pass Through Certificates
should consult their own tax advisors regarding the federal, state, local and
any other tax consequences to them of the purchase, ownership and disposition of
Pass Through Certificates in light of their own particular circumstances. The
Trusts are not indemnified for any federal income taxes that may be imposed upon
them, and the imposition of any such taxes on a Trust could result in a
reduction in the amounts available for distribution to the Certificate Owners of
such Trust.
GENERAL
The Trusts will not be classified as associations taxable as corporations
and, accordingly, will not themselves be subject to federal income taxation.
Except to the extent discussed in the applicable Prospectus Supplement, based
upon an interpretation of analogous authorities under existing law, each Trust
should be classified as a grantor trust for federal income tax purposes. The
discussion below assumes that the Trusts will be classified as grantor trusts.
Each Certificate Owner will be treated as the owner of a pro rata undivided
interest in each Equipment Note and any other property held in the related Trust
and will be required to report on its federal income tax return its pro rata
share of the entire income from each of the Equipment Notes and any other
property held in the related Trust, in accordance with such Certificate Owner's
method of accounting. A Certificate Owner using the cash method of accounting
must take into account its pro rata share of income as and when received by the
Trustee. A Certificate Owner using an accrual method of accounting must take
into account its pro rata share of income as it accrues or is received by the
Trustee, whichever is earlier.
A purchaser of a Pass Through Certificate will be treated as purchasing an
interest in each Equipment Note and any other property in the related Trust at a
price determined by allocating the purchase price paid for the Pass Through
Certificate among such Equipment Notes and other property in proportion to their
fair market values at the time of purchase of the Pass Through Certificate.
SALES OF PASS THROUGH CERTIFICATES
A Certificate Owner that sells a Pass Through Certificate will recognize
capital gain or loss (in the aggregate) equal to the difference between the
amount realized on the sale (except to the extent attributable to accrued
interest, which will be taxable as interest income if not previously included in
income) and such Certificate Owner's adjusted tax basis in the Pass Through
Certificate. Any such gain or loss generally will be long-term capital gain or
loss if the Pass Through Certificate was held for more than one year (except to
the extent attributable to any property held by the related Trust for one year
or less). Any long-term capital gains with respect to the Pass Through
Certificates are taxable to corporate taxpayers at the rates applicable to
ordinary income and to individual taxpayers at a maximum rate of 20%. Any
capital losses will be deductible by corporate taxpayers only to the extent of
capital gains and by an individual taxpayer only to the extent of capital gains
plus $3,000 of other income.
BOND PREMIUM
A Certificate Owner generally will be considered to have acquired an
interest in an Equipment Note held in the related Trust at a bond premium to the
extent such Certificate Owner's tax basis allocable to such Equipment Note
exceeds the remaining principal amount of the Equipment Note allocable to such
Certificate Owner's Pass Through Certificate. In that event, a Certificate Owner
may, in certain circumstances, be able to amortize that bond premium (generally
on a constant yield basis) as an offset to interest income with corresponding
reductions in such Certificate Owner's tax basis in such Equipment Note. Special
rules apply to an Equipment Note that may be called at a redemption premium
prior to maturity. It is unclear how these rules apply to an Equipment Note when
there is more than one possible call date and the amount of any redemption
premium is uncertain. Certificate Owners should consult their own tax advisors
regarding the
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advisability and consequences of an election to amortize any bond premium with
respect to the Equipment Notes.
ORIGINAL ISSUE DISCOUNT
Except to the extent specified in the applicable Prospectus Supplement, the
Equipment Notes will not be issued with original issue discount unless certain
aggregation rules set forth in the Treasury regulations apply. Under those
rules, if one investor purchases Pass Through Certificates issued by more than
one Trust, certain of that investor's interests in the Equipment Notes in those
Trusts must in certain circumstances be treated together as a single debt
instrument, which, for purposes of calculating and amortizing any original issue
discount, has a single issue price, maturity date, stated redemption price at
maturity and yield to maturity. If the aggregation rules apply to an investor,
such Equipment Notes could be treated with respect to such investor as having
been issued with original issue discount. Generally, a holder of a debt
instrument issued with original issue discount that is not de minimis must
include such original issue discount in income for federal income tax purposes
as it accrues, in advance of the receipt of the cash attributable to such
income, under a method that takes into account the compounding of interest.
Certificate Owners should consult their own tax advisors regarding the
aggregation rules.
BACKUP WITHHOLDING
Payments made on Pass Through Certificates, and proceeds from the sale of
Pass Through Certificates to or through certain brokers, may be subject to a
"backup" withholding tax of 31% unless the Certificate Owner complies with
certain reporting procedures or is exempt from such requirements. Any such
withheld amounts will be allowed as a credit against the Certificate Owner's
federal income tax and may entitle such Certificate Owner to a refund if the
required information is furnished to the Internal Revenue Service. Certain
penalties may be imposed by the Internal Revenue Service on a Certificate Owner
who is required to supply information but who does not do so in the proper
manner.
CERTAIN CONNECTICUT TAXES
The Trustee is a national banking association with its corporate trust
office in Connecticut. Bingham Dana LLP, counsel to the Trustee, has advised
American that, in its opinion, under currently applicable law, assuming that
each Trust will not be taxable as a corporation for federal income tax purposes,
but, rather, will be classified for such purposes as a grantor trust or as a
partnership, (i) the Trusts will not be subject to any tax (including, without
limitation, net or gross income, tangible or intangible property, net worth,
capital, franchise or doing business tax), fee or other governmental charge
under the laws of the State of Connecticut or any political subdivision thereof
and (ii) Certificate Owners that are not residents of or otherwise subject to
tax in Connecticut will not be subject to any tax (including, without
limitation, net or gross income, tangible or intangible property, net worth,
capital, franchise or doing business tax), fee or other governmental charge
under the laws of the State of Connecticut or any political subdivision thereof
as a result of purchasing, owning (including receiving payments with respect to)
or selling a Pass Through Certificate. Neither the Trusts nor the Certificate
Owners will be indemnified for any state or local taxes imposed on them, and the
imposition of any such taxes on a Trust could result in a reduction in the
amounts available for distribution to the Certificate Owners of such Trust. In
general, should a Certificate Owner or a Trust be subject to any state or local
tax that would not be imposed if the Trust were administered in a different
jurisdiction in the United States or if the Trustee were located in a different
jurisdiction in the United States, the Trustee will either relocate the
administration of the Trust to such other jurisdiction or resign and, in the
event of such a resignation, a new Trustee in such other jurisdiction will be
appointed.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable Prospectus Supplement, Pass
Through Certificates may, subject to certain legal restrictions, be purchased
and held by an employee benefit plan (a "Plan") subject to Title I of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or an
individual
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retirement account or an employee benefit plan subject to section 4975 of the
Internal Revenue Code. A fiduciary of a Plan must determine that the purchase
and holding of a Pass Through Certificate is consistent with its fiduciary
duties under ERISA and does not result in a non-exempt prohibited transaction as
defined in Section 406 of ERISA or Section 4975 of the Internal Revenue Code.
Employee benefit plans which are governmental plans (as defined in Section 3(32)
of ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are
not subject to the fiduciary responsibility provisions of ERISA. The
Certificates may, subject to certain legal restrictions, be purchased and held
by such plans.
PLAN OF DISTRIBUTION
The Pass Through Certificates being offered hereby may be sold in any one
or more of the following ways from time to time: (i) through agents; (ii) to or
through underwriters; (iii) through dealers; and (iv) directly to other
purchasers.
The distribution of the Pass Through Certificates may be effected from time
to time in one or more transactions at a fixed price or prices, which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
Offers to purchase Pass Through Certificates may be solicited by agents
designated by American from time to time. Any such agent involved in the offer
or sale of the Pass Through Certificates in respect of which this Prospectus is
delivered will be named, and any commissions payable by American to such agent
will be set forth, in the applicable Prospectus Supplement. Unless otherwise
indicated in such Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment. Any such agent may be deemed to
be an underwriter, as that term is defined in the Securities Act, of the Pass
Through Certificates so offered and sold.
If Pass Through Certificates are sold by means of an underwritten offering,
American will execute an underwriting agreement with an underwriter or
underwriters at the time an agreement for such sale is reached, and the names of
the specific managing underwriter or underwriters, as well as any other
underwriters, and the terms of the transaction, including commissions, discounts
and any other compensation of the underwriters and dealers, if any, will be set
forth in the Prospectus Supplement which will be used by the underwriters to
make resales of the Pass Through Certificates in respect of which this
Prospectus is delivered to the public. If underwriters are utilized in the sale
of the Pass Through Certificates in respect of which this Prospectus is
delivered, the Pass Through Certificates will be acquired by the underwriters
for their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at fixed public offering prices
or at varying prices determined by the underwriters at the time of sale. Pass
Through Certificates may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by the managing
underwriters. If any underwriter or underwriters are utilized in the sale of the
Pass Through Certificates, unless otherwise indicated in the Prospectus
Supplement, the underwriting agreement will provide that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters with respect to a sale of Pass Through Certificates will be
obligated to purchase all such Pass Through Certificates if any are purchased.
American does not intend to apply for listing of the Pass Through
Certificates on a national securities exchange. If the Pass Through Certificates
are sold by means of an underwritten offering, the underwriters may make a
market in the Pass Through Certificates as permitted by applicable laws and
regulations. No underwriter would be obligated, however, to make a market in the
Pass Through Certificates and any such market-making could be discontinued at
any time at the sole discretion of such underwriter. Accordingly, no assurance
can be given as to the liquidity of, or trading markets for, the Pass Through
Certificates.
If a dealer is utilized in the sale of the Pass Through Certificates in
respect of which this Prospectus is delivered, such Pass Through Certificates
will be sold by the Trustee to the dealer as principal. The dealer may then
resell such Pass Through Certificates to the public at varying prices to be
determined by such dealer at the time of resale. Any such dealer may be deemed
to be an underwriter, as such term is defined in the
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Securities Act, of the Pass Through Certificates so offered and sold. The name
of the dealer and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
Offers to purchase Pass Through Certificates may be solicited directly and
the sale thereof may be made directly to institutional investors or others, who
may be deemed to be underwriters within the meaning of the Securities Act with
respect to any resale thereof. The terms of any such sales will be described in
the Prospectus Supplement relating thereto.
Agents, underwriters and dealers may be entitled under relevant agreements
to indemnification or contribution by American against certain liabilities,
including liabilities under the Securities Act.
Agents, underwriters and dealers may be customers of, engage in
transactions with, or perform services for, AMR Corporation, American and AMR
Corporation's other subsidiaries.
If so indicated in the applicable Prospectus Supplement, agents,
underwriters or dealers may be authorized to solicit offers by certain
institutions to purchase Pass Through Certificates at the public offering prices
set forth in the applicable Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on a specified date
or dates. A commission indicated in the applicable Prospectus Supplement will be
paid to agents, underwriters and dealers soliciting purchases of Pass Through
Certificates pursuant to Contracts accepted by American.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Pass Through Certificates offered hereby will be passed upon for
American by Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022 and
for any agents, underwriters or dealers by Shearman & Sterling, 599 Lexington
Avenue, New York, New York 10022. Unless otherwise indicated in the applicable
Prospectus Supplement, Debevoise & Plimpton and Shearman & Sterling will rely on
the opinion of counsel for the Trustee as to certain matters relating to the
authorization, execution and delivery of such Pass Through Certificates by, and
the valid and binding effect thereof on, such Trustee and on the opinion of Anne
H. McNamara, Esq., Senior Vice President and General Counsel of American, as to
certain matters relating to the authorization, execution and delivery of the
Basic Agreement by American.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 1998, as set forth in their reports, which are
incorporated in this Prospectus by reference. Our consolidated financial
statements and schedule are incorporated by reference in reliance on their
reports, given on their authority as experts in accounting and auditing.
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