<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration Nos. 333-68211
33-46325
33-52121
Prospectus Supplement to Prospectus dated December 18, 1998.
$150,000,000
AMR CORPORATION
7.875% Public Income NotES (PINES(SM)) due 2039
----------------------
This is an offering of 7.875% Public Income NotES ("PINES") due 2039 of AMR
Corporation. The PINES will be general unsecured, unsubordinated obligations of
AMR. AMR will pay interest on the PINES on January 31, April 30, July 31 and
October 31 of each year. The first such payment will be made on July 31, 1999.
On or after July 13, 2004, the PINES will be redeemable at the option of AMR, in
whole or in part, at a redemption price equal to 100% of the principal amount
redeemed plus accrued and unpaid interest to the redemption date. The PINES will
be issued in minimum denominations of $25 and integral multiples of $25.
AMR intends to list the PINES on the New York Stock Exchange and expects
trading in the PINES on the New York Stock Exchange to begin within 30 days
after the original issue date.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per PINES Total
--------- -----
<S> <C> <C>
Initial public offering price............................... 100.00% $150,000,000
Underwriting discount....................................... 3.15% $ 4,725,000
Proceeds, before expenses, to AMR........................... 96.85% $145,275,000
</TABLE>
The initial public offering price set forth above does not include accrued
interest, if any. Interest on the PINES will accrue from July 13, 1999 and must
be paid by the purchaser if the PINES are delivered after July 13, 1999.
To the extent the underwriters sell more than $150,000,000 aggregate
principal amount of the PINES, the underwriters have the option to purchase up
to an additional $22,500,000 aggregate principal amount of the PINES from AMR at
the initial public offering price (plus accrued interest from July 13, 1999)
less the underwriting discount.
----------------------
The underwriters expect to deliver the PINES in book-entry form only
through the facilities of The Depository Trust Company against payment in New
York, New York on July 13, 1999.
- ------------------
"PINES" is a service mark of Salomon Smith Barney Inc.
Joint Book - Running Managers
GOLDMAN, SACHS & CO. SALOMON SMITH BARNEY
----------------------
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES
CREDIT SUISSE FIRST BOSTON
----------------------
Prospectus Supplement dated July 7, 1999.
<PAGE> 2
RATIO OF EARNINGS TO FIXED CHARGES
The following table contains AMR's ratio of earnings to fixed charges for
the periods indicated:
<TABLE>
<CAPTION>
THREE
MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------- MARCH 31,
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges... 1.23 1.20 2.21 2.35 2.81 1.45
</TABLE>
For purposes of the table, "earnings" represents AMR'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.
DESCRIPTION OF THE PINES
GENERAL
The PINES will be issued under the Indenture referred to in the Prospectus
and a supplement to such Indenture, dated July 13, 1999, relating to the PINES.
We will file the Indenture Supplement with the SEC as part of a Current Report
on Form 8-K. When we refer to the "Indenture" in this Prospectus Supplement, we
refer to the Indenture as supplemented by the Indenture Supplement.
The following statements about the PINES are summaries and are subject to,
and qualified in their entirety by reference to, the Prospectus and the
Indenture. See "Description of Debt Securities" in the Prospectus for additional
information concerning the PINES and the Indenture. The following statements,
therefore, do not contain all the information that may be important to you. Not
all the terms used in this Prospectus Supplement are defined herein, and you
should refer to the Prospectus or the Indenture for the definitions of such
terms. You should note that the provisions of the Indenture set forth the terms
of the PINES in greater detail than this Prospectus Supplement or the
Prospectus. If the statements herein differ from provisions in the Indenture,
the provisions of the Indenture control.
QUARTERLY INTEREST PAYMENTS
Interest on the PINES will accrue from July 13, 1999 at a rate of 7.875%
per annum and will be payable in arrears initially on July 31, 1999 and
thereafter quarterly on January 31, April 30, July 31 and October 31 of each
year (each an "Interest Payment Date"). On an Interest Payment Date, interest
will be paid to the persons in whose names the PINES were registered as of the
record date. With respect to any Interest Payment Date, the record date will be
the fifteenth day of the month in which such Interest Payment Date occurs,
except as otherwise provided in the Indenture.
The amount of interest payable for any period will be computed on the basis
of twelve 30-day months and a 360-day year and, for any period shorter than a
full quarterly interest period, will be computed on the basis of the actual
number of days elapsed in such 90-day quarterly interest period. If any Interest
Payment Date falls on a Saturday, a Sunday or a day on which banking
institutions in New York, New York are authorized or obligated by law or
executive order to close, then payment of interest may be made on the next
succeeding business day without additional interest.
Payments of principal and interest will be payable at the office of the
Trustee in New York, New York at which the Trustee's corporate trust business is
then principally
S-2
<PAGE> 3
administered or at such other paying agent as may be designated pursuant to the
Indenture. AMR may, however, at its option pay interest by having the Trustee
mail checks or make wire transfers to registered holders of the PINES.
At the maturity of the PINES, the principal and accrued interest of the
PINES will be payable upon the surrender of the PINES by the registered holders
of the PINES at the office of the Trustee. As long as the PINES are held through
the facilities of The Depository Trust Company ("DTC"), as described under
"Book-Entry Only" below, the only registered holder of the PINES will be DTC or
a nominee of DTC.
REDEMPTION AND REPAYMENT
The PINES will be redeemable at the option of AMR, in whole or in part, at
any time on or after July 13, 2004, upon not less than 30 nor more than 60 days'
notice, at a redemption price equal to 100% of the principal amount redeemed
plus accrued and unpaid interest to the redemption date. Additionally, AMR may
at any time repurchase PINES at any price in the open market and may hold,
resell or surrender such PINES to the Trustee for cancellation. You will not
have the right to require AMR to repay PINES prior to maturity.
BOOK-ENTRY ONLY
The PINES will be issued only in book-entry form through the facilities of
DTC acting as the Depositary in denominations of $25 and integral multiples of
$25. The PINES will be represented by a single Registered Global Security (the
"Global Security") and will be registered in the name of a nominee of the
Depositary. The Depositary has advised us that it is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, 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 the provisions
of Section 17A of the Securities Exchange Act of 1934, as amended. The
Depositary holds securities that its participants deposit with the Depositary.
The Depositary also facilitates the settlement among its participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in its participants'
accounts, thereby eliminating the need for physical movement of securities. The
Depositary's participants include securities brokers and dealers (including the
underwriters), banks, trust companies, clearing corporations and certain other
organizations. Certain of such participants (or their representatives), together
with the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
the National Association of Securities Dealers, Inc., own the Depositary.
Indirect access to the Depositary's system is also available to others, such as
securities brokers and dealers, banks and trust companies, that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly. If you are not a participant and you wish to purchase, sell or
otherwise transfer ownership of, or other interests in, the PINES, you must do
so through a participant or an entity who has indirect access through a
participant. The rules applicable to the Depositary and its participants are on
file with the SEC.
Upon the issuance of the Global Security, the Depositary will credit its
participants' accounts on its book-entry registration and transfer system with
their respective principal amounts of the PINES represented by such Global
Security. The underwriters designate which participants' accounts will be
credited. The only persons who may own beneficial interests in the Global
Security will be the Depositary's participants or persons that hold interests
through such participants. Ownership of beneficial interests in the Global
Security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the Depositary or its nominee (with respect
to interests of its participants) and on the records of its participants (with
respect to interests of persons other than such participants). The laws of some
states may require that certain
S-3
<PAGE> 4
purchasers of securities take physical delivery of such securities in definitive
form. Such laws may impair your ability to transfer your interest in PINES.
So long as the Depositary or its nominee is the registered owner of the
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or Holder of the PINES represented by such Global
Security for all purposes under the Indenture. Except as provided below or as we
may otherwise agree in our sole discretion, owners of beneficial interests in
the Global Security will not be entitled to have PINES represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of PINES in definitive form and will not be considered
the owners or "Holders" thereof under the Indenture.
Principal and interest payments on PINES registered in the name of the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner of the Global Security representing such
PINES. None of AMR, the Trustee, any paying agent or the registrar for the PINES
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial interests in such Global Security
for the PINES or for maintaining, supervising or reviewing any records relating
to such beneficial interests.
We expect that the Depositary for the PINES or its nominee, upon receipt of
any payment of principal or interest, will credit immediately its participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Security for the PINES as shown
on the records of the Depositary or its nominee. We also expect that payments by
such participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name" (i.e., the name of a
securities broker or dealer). Such payments will be the responsibility of such
participants. You may experience some delay in receiving payments under this
system.
If the Depositary is at any time unwilling or unable or no longer qualifies
to continue as depositary and a successor depositary is not appointed by AMR
within 90 days, AMR will issue PINES in definitive form in exchange for the
entire Global Security representing such PINES. In addition, AMR may at any
time, in its sole discretion, determine not to have the PINES represented by the
Global Security and, in such event, will issue PINES in definitive form in
exchange for the Global Security representing such PINES.
The information contained in this Prospectus Supplement concerning DTC and
its book-entry system has been obtained from sources AMR believes to be
reliable, but AMR has not verified such information and takes no responsibility
for its accuracy. See "Description of Debt Securities" and, in particular,
"Description of Debt Securities -- Global Dept Securities" in the Prospectus for
additional information and certain special investor considerations relating to
the use of a book-entry system for the PINES.
THE TRUSTEE
The trustee under the Indenture is Citibank, N.A., as Trustee, and is
referred to in this Prospectus Supplement as the "Trustee". The Trustee also
provides other banking services to AMR.
Upon the occurrence of an Event of Default or an event which, after notice
or lapse of time or both, would become an Event of Default, the Trustee may be
deemed to have a conflicting interest with respect to the PINES for purposes of
the Trust Indenture Act of 1939 and, unless the Trustee is able to eliminate any
such conflicting interest, the Trustee may be required to resign as Trustee
under the Indenture. In that event, AMR would be required to appoint a successor
trustee for the Indenture.
S-4
<PAGE> 5
UNDERWRITING
AMR and the underwriters for the offering (the "Underwriters") named below
have entered into an underwriting agreement with respect to the PINES. Subject
to certain conditions, each Underwriter has severally agreed to purchase the
principal amount of PINES indicated in the following table. Goldman, Sachs & Co.
and Salomon Smith Barney Inc. are the representatives of the Underwriters.
<TABLE>
<CAPTION>
Principal Amount
Underwriters of PINES
------------ --------
<S> <C>
Goldman, Sachs & Co......................................... $ 19,625,000
Salomon Smith Barney Inc. .................................. 19,625,000
Morgan Stanley & Co. Incorporated........................... 19,500,000
PaineWebber Incorporated.................................... 19,500,000
Prudential Securities Incorporated.......................... 19,500,000
Credit Suisse First Boston Corporation...................... 5,000,000
Bear, Stearns & Co. Inc. ................................... 1,750,000
CIBC World Markets Corp..................................... 1,750,000
Charles Schwab & Co., Inc. ................................. 1,750,000
Chase Securities Inc. ...................................... 1,750,000
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated.................. 1,750,000
Deutsche Bank Securities Inc. .............................. 1,750,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 1,750,000
A.G. Edwards & Sons, Inc. .................................. 1,750,000
EVEREN Securities, Inc. .................................... 1,750,000
National Financial Services Corporation..................... 1,750,000
The Robinson-Humphrey Company, LLC.......................... 1,750,000
SG Cowen Securities Corporation............................. 1,750,000
Warburg Dillon Read LLC..................................... 1,750,000
ABN AMRO Incorporated....................................... 875,000
Advest, Inc. ............................................... 875,000
BB&T Capital Markets........................................ 875,000
Robert W. Baird & Co. Incorporated.......................... 875,000
Banc of America Securities LLC.............................. 875,000
M.R. Beal & Company......................................... 875,000
J.C. Bradford & Co. ........................................ 875,000
Crowell, Weedon & Co. ...................................... 875,000
Fahnestock & Co. Inc. ...................................... 875,000
Fifth Third Securities, Inc. ............................... 875,000
First Union Capital Markets Corp. .......................... 875,000
Guzman & Company............................................ 875,000
J.J.B. Hilliard, W.L. Lyons, Inc. .......................... 875,000
Janney Montgomery Scott Inc. ............................... 875,000
Legg Mason Wood Walker, Incorporated........................ 875,000
McDonald Investments Inc., A KeyCorp Company................ 875,000
McGinn, Smith & Co., Inc. .................................. 875,000
Morgan Keegan & Company, Inc. .............................. 875,000
Olde Discount Corporation................................... 875,000
RONEY CAPITAL MARKETS
A division of BANC ONE CAPITAL MARKETS, Inc. ............. 875,000
Raymond James & Associates, Inc. ........................... 875,000
Southwest Securities, Inc. ................................. 875,000
Sutro & Co. Incorporated.................................... 875,000
TD Securities (USA) Inc. ................................... 875,000
Tucker Anthony Cleary Gull.................................. 875,000
</TABLE>
S-5
<PAGE> 6
<TABLE>
<CAPTION>
Principal Amount
Underwriters of PINES
------------ --------
<S> <C>
U.S. Bancorp Piper Jaffray Inc. ............................ $ 875,000
Wachovia Securities, Inc. .................................. 875,000
Wedbush Morgan Securities................................... 875,000
------------
Total............................................. $150,000,000
============
</TABLE>
----------------------
If the Underwriters sell more PINES than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional
$22,500,000 principal amount of PINES from AMR at the initial public offering
price (plus accrued interest from July 13, 1999) less the underwriting discount
to cover such sales. They may exercise that option for 30 days. If any PINES are
purchased pursuant to this option, the Underwriters will severally purchase the
PINES in approximately the same proportion as set forth in the table above.
The following table shows the per PINES and total underwriting discounts
and commissions to be paid to the Underwriters by AMR. Such amounts are shown
assuming both no exercise and full exercise of the Underwriters' option to
purchase additional PINES.
Paid by AMR
<TABLE>
<CAPTION>
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per PINES............ $ 0.7875 $ 0.7875
Total................ $4,725,000 $5,433,750
</TABLE>
PINES sold by the Underwriters to the public will initially be offered at
the initial public offering price set forth on the front page of this Prospectus
Supplement. Any PINES sold by the Underwriters to securities dealers may be sold
at a discount from the initial public offering price of up to $0.50 per PINES.
Any such securities dealers may resell any PINES purchased from the Underwriters
to certain other brokers or dealers at a discount from the initial public
offering price of up to $0.45 per PINES. If all the PINES are not sold at the
initial offering price, the representatives may change the offering price and
the other selling terms.
Prior to the offering, there has been no public market for the PINES. AMR
intends to list the PINES on the New York Stock Exchange and expects trading in
the PINES on the New York Stock Exchange to begin within 30 days after the
original issue date. In order to meet one of the requirements for listing the
PINES, the Underwriters will undertake to sell lots of 100 or more PINES to a
minimum of 400 beneficial holders.
The PINES are a new issue of securities with no established trading market.
AMR has been advised by the Underwriters that the Underwriters intend to make a
market in the PINES but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the PINES.
In connection with the offering, the Underwriters may purchase and sell
PINES in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriters of a greater principal
amount of PINES than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the PINES while the
offering is in progress.
The Underwriters also may impose a penalty bid. This may occur when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives have repurchased PINES sold
by or for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the PINES. As a result, the price of the PINES may be
higher than the
S-6
<PAGE> 7
price that otherwise might exist in the open market. If these activities are
commenced, they may be discontinued by the Underwriters at any time. These
transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.
AMR estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$300,000.
AMR has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
Certain of the Underwriters and their affiliates have provided, and may in
the future provide, commercial banking, investment banking, financial advisory
and other services to AMR and its affiliates.
S-7
<PAGE> 8
$1,250,000,000
AMR CORPORATION
DEBT SECURITIES
---------------------
We will provide the specific terms of these Debt Securities in Supplements
to this Prospectus. You should read this Prospectus and the appropriate
Supplements carefully before you invest.
---------------------
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.
---------------------
We may sell the Debt Securities to or through underwriters, through dealers
or agents or directly to purchasers. We will describe the plan of distribution
for any particular series of Debt Securities in the applicable Prospectus
Supplement.
The date of this Prospectus is December 18, 1998
<PAGE> 9
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 Debt
Securities described in this Prospectus in one or more offerings. This
Prospectus provides you with a general description of the Debt Securities we may
offer. Each time we sell Debt Securities, 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 AMR or the Debt
Securities, 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 Debt
Securities 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 and proxy statements 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 and through the New York Stock Exchange, 20
Broad Street, New York, New York 10005, on which our common stock is listed. 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; and
- information that we file with the SEC will automatically update and
supersede this Prospectus.
2
<PAGE> 10
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 until we complete our offering of Debt
Securities:
- Annual Report on Form 10-K/A No. 1 for the year ended December 31, 1997;
- Quarterly Report on Form 10-Q/A No. 1 for the quarter ended March 31,
1998 and Quarterly Reports on Form 10-Q for the quarters ended June 30,
1998 and September 30, 1998; and
- Current Reports on Form 8-K filed April 16, 1998, May 21, 1998, July 16,
1998, October 22, 1998 and November 19, 1998.
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
AMR Corporation
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 Debt Securities 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 AMR since the
date of this Prospectus or any applicable Prospectus Supplement.
3
<PAGE> 11
AMR CORPORATION
AMR Corporation ("AMR") is a holding company that conducts its business
through its subsidiaries. AMR's operations fall within three major lines of
business: the Airline Group, The SABRE Group and the Management Services Group.
- THE AIRLINE GROUP consists primarily of the passenger and cargo divisions
of American Airlines, Inc. ("American"), the principal subsidiary of AMR,
and AMR Eagle Holding Corporation ("AMR Eagle"), a separate subsidiary of
AMR.
o American's passenger division is one of the largest scheduled passenger
airlines in the world. At the end of 1997, American provided scheduled
jet service to more than 165 destinations throughout North America, the
Caribbean, Latin America, Europe and the Pacific.
o American's cargo division is one of the largest scheduled air freight
carriers in the world. It provides a full range of freight and mail
services to shippers throughout the airline's system.
o AMR Eagle owns the regional airlines that operate as "American Eagle".
The American Eagle carriers provide connecting service from six of
American's high-traffic cities to smaller markets throughout the United
States, Canada and the Caribbean.
- THE SABRE GROUP, an 82%-owned subsidiary of AMR, is a world leader in the
electronic distribution of travel through its proprietary travel
reservation and information system, SABRE(R), and is the largest
electronic distributor of travel in North America. In addition, The SABRE
Group is a leading provider of information technology solutions to the
travel and transportation industry and fulfills substantially all of the
data processing, network and distributed systems needs of American and
AMR's other subsidiaries, Canadian Airlines International Limited, US
Airways, Inc. and other customers.
- THE MANAGEMENT SERVICES GROUP provides a range of aviation services, call
center management services, investment advisory services to AMR and other
institutional investors, and management of certain service contracts
between subsidiaries of AMR and certain other airlines.
In September 1998, AMR announced plans to sell three of the companies
within the Management Services Group that account for a substantial portion of
the group's revenues and operating income: AMR Services, AMR Combs, and
TeleService Resources. The results of operations of these three companies, as
well as other discontinued operations of the Management Services Group,
represented only 2.5% and 2.8% of AMR's consolidated revenues for the nine
months ended September 30, 1998 and for the year ended December 31, 1997,
respectively, and only 0.8% and 1.3% of AMR's consolidated operating income for
the nine months ended September 30, 1998 and for the year ended December 31,
1997, respectively.
The postal address for AMR's principal executive offices is P.O. Box
619616, Dallas/Fort Worth Airport, Texas 75261-9616 (telephone: 817-963-1234).
USE OF PROCEEDS
Except as we may describe otherwise in a Prospectus Supplement, the net
proceeds from the sale of the Debt Securities will be added to AMR's working
capital and will be available for general corporate purposes, including the
acquisition of aircraft by American and American Eagle and other capital
expenditures.
4
<PAGE> 12
RATIO OF EARNINGS TO FIXED CHARGES
The following table contains AMR's ratio of earnings to fixed charges for
the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS
-------------------------------- ENDED
1993 1994 1995 1996 1997 SEPTEMBER 30, 1998
---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.......... (a) 1.23 1.20 2.21 2.35 3.08
</TABLE>
- ---------------
(a) Earnings were inadequate to cover fixed charges by $187 million for the year
ended December 31, 1993.
For purposes of the table, "earnings" represents AMR's consolidated income
(loss) 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.
5
<PAGE> 13
DESCRIPTION OF DEBT SECURITIES
INTRODUCTION
We will issue the Debt Securities in one or more distinct series. The Debt
Securities may include debentures, notes or other kinds of unsecured debt
obligations. The Debt Securities may be denominated in United States dollars or
in one or more foreign currencies or currency units. The maximum principal
amount of Debt Securities that we may issue pursuant to this Prospectus is
limited to $1,250,000,000, subject to two exceptions. First, if we choose to
issue any Debt Securities denominated in a foreign currency or a currency unit,
the U.S.-dollar equivalent of the principal amount of such Debt Securities,
based on the exchange rate at the time of their sale, will be applied against
such $1,250,000,000 limit. Second, if we choose to issue any Debt Securities at
an "original issue discount", the amount of the proceeds we receive from their
sale will be applied against such $1,250,000,000 limit. A Debt Security issued
at an "original issue discount" is a Debt Security that is sold at a substantial
discount below its stated principal amount. Typically, a Debt Security issued at
an "original issue discount" will not bear interest or will bear interest at an
interest rate that is below the market interest rate at the time of issuance.
This Description summarizes terms of the Debt Securities that we expect
will be common to all series. Most of the financial terms and other specific
terms of any series of Debt Securities that we offer will be described in a
Prospectus Supplement to be attached to this Prospectus. Since the terms of
specific Debt Securities may differ from the general information that we have
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 than the information below.
We will issue the Debt Securities under a contract called the "Indenture"
between us and the Trustee, Citibank, N.A. Unless we tell you otherwise in the
applicable Prospectus Supplement, the Indenture and the Debt Securities are
governed by New York law. The terms of the Debt Securities include those stated
in the Debt Securities and the Indenture, and those made part of the Indenture
by reference to the Trust Indenture Act of 1939. (Section 1.11 of the
Indenture.) The form of the Indenture is contained in the registration statement
that we have filed with the SEC. See "Where You Can Find More Information" on
page 2 for information on how to obtain a copy of the Indenture from the SEC.
Because this Description is a summary, it does not describe every aspect of
the Debt Securities or the Indenture. This summary is subject to and qualified
in its entirety by reference to all the provisions of the Indenture and of the
Debt Securities. For example, in this Description we use capitalized words to
signify defined terms that have been given special meaning in the Indenture. We
describe the meaning for only some of the more important terms. We also include
references in parentheses to certain sections of the Indenture. Whenever we
refer to particular sections or defined terms of the Indenture in this
Prospectus or in any Prospectus Supplement, such sections or defined terms are
incorporated by reference here or in the Prospectus Supplement.
This Description also is subject to and qualified by reference to the
description of the particular terms of any particular series of Debt Securities
described in a Prospectus Supplement.
GENERAL TERMS OF DEBT SECURITIES
AMR is a holding company that conducts its business through its
subsidiaries. As a result, AMR's cash flow and, therefore, its ability to meet
its debt obligations depend primarily upon the earnings of its subsidiaries and
on dividends and other payments from its subsidiaries. Since the Debt Securities
are solely an obligation of AMR, AMR's subsidiaries are not required to make
payments on the Debt Securities or to make funds available (for example, in the
form of dividends or advances to AMR) for payments on the Debt Securities. In
addition, certain of American's debt and credit facility agreements contain
restrictive covenants, including a minimum net worth requirement, that could
limit American's ability to pay dividends and, consequently, could affect AMR's
ability to pay the Debt Securities. At December 31, 1997, under the most
restrictive provisions of those debt and credit facility agreements,
approximately $1.9 billion of the retained earnings of American were available
for payment of dividends to AMR.
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Because AMR is a holding company, the Debt Securities are effectively
subordinated to all existing and future liabilities of AMR's subsidiaries. This
means that upon the liquidation, reorganization or insolvency of American or any
other subsidiary, the claims of creditors and preferred stockholders of such
subsidiary will generally take priority over AMR's right to participate as a
stockholder in any distribution of the assets of such subsidiary. Even if AMR is
itself a creditor of such subsidiary, and its claims against such subsidiary are
recognized, AMR's claims would still be subordinate to any third-party security
interests in such subsidiary's assets and any senior indebtedness of such
subsidiary.
The Debt Securities will be unsecured obligations but will constitute
"senior debt" of AMR. That is, the Debt Securities will not be subordinated to
any other existing or future unsecured indebtedness of AMR. The Indenture does
not limit the total amount of Debt Securities that we can issue under it, nor
does it limit us from incurring or issuing other unsecured or secured debt. The
Indenture moreover does not contain any provisions that protect you in the event
we issue a large amount of debt or are acquired by another entity.
SPECIFIC TERMS OF DEBT SECURITIES
A Prospectus Supplement will describe specific terms relating to each
series of Debt Securities then being offered. These terms will include some or
all of the following:
- the title and type of such Debt Securities;
- the total principal amount of such Debt Securities;
- the date or dates on which the principal of such Debt Securities will be
payable, or the method of determining or extending such date(s), and the
amount or amounts of such principal payments;
- the date or dates from which any interest will accrue, or the method of
determining such date(s);
- any interest rate or rates (which may be fixed or variable) that such
Debt Securities will bear, or the method of determining or resetting such
rate or rates, and the interest payment dates (if any) for such Debt
Securities;
- the place or places where any principal, premium or interest payments may
be made;
- any optional redemption provisions, including the period(s) within which,
the price(s) at which, the currency or currencies (including currency
units) in which, and the terms and conditions upon which, AMR may redeem
such Debt Securities;
- any provisions obligating AMR to repurchase or otherwise redeem such Debt
Securities pursuant to sinking fund provisions, upon the occurrence of a
specified event or at the Holder's option;
- if other than $1,000 denominations, the denominations in which such Debt
Securities are issuable;
- the currency or currency units of such Debt Securities;
- any index, formula or other method to be used for determining the amount
of any payments on such Debt Securities;
- if other than the outstanding principal amount, the amount that will be
payable if the maturity of such Debt Securities is accelerated, or the
method of determining such amount;
- the person to whom any interest on such Debt Securities will be payable
(if other than the registered Holder of such Debt Securities on the
applicable record date);
- any changes to or additional Events of Default or covenants;
- any provisions for the payment of additional amounts on Debt Securities
held by non-U.S. persons in respect of taxes or similar charges withheld
or deducted, and for the optional redemption of such Debt Securities in
lieu of paying such additional amounts;
- any provisions modifying the defeasance or covenant defeasance provisions
that apply to such Debt Securities;
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- whether such Debt Securities will be issued in whole or in part in the
form of one or more temporary or permanent global securities, and, if so,
the identity of the depositary for such global security or securities;
- if other than the laws of New York, the law governing such Debt
Securities and the extent to which such other law governs; and
- any other special terms of such Debt Securities.
(Section 3.1 of the Indenture.)
Unless we tell you otherwise in the applicable Prospectus Supplement, Debt
Securities will not be listed on any securities exchange.
Unless we tell you otherwise in the applicable Prospectus Supplement, Debt
Securities will be issued in fully registered form without coupons. If Debt
Securities of any series are issued in bearer form, the applicable Prospectus
Supplement will describe special restrictions and considerations, including
special offering restrictions and special federal income tax considerations,
applicable to such Debt Securities and to payments on and transfer and exchange
of such Debt Securities. Bearer Debt Securities generally will be transferable
by delivery. (Section 3.5 of the Indenture.) The Indenture refers to each Person
who is the bearer of a bearer Debt Security as the "Holder" of that Debt
Security. (Section 1.1 of the Indenture.)
If we issue Debt Securities at an "original issue discount", the applicable
Prospectus Supplement will describe certain special federal income tax and other
considerations applicable to such Debt Securities.
If the purchase price of any Debt Securities is payable in foreign
currencies or currency units or if any Debt Securities are denominated in
foreign currencies or currency units, or if any Debt Securities are payable in
foreign currencies or currency units, the applicable Prospectus Supplement will
describe the special restrictions, elections, federal income tax considerations
and certain other important information with respect to such Debt Securities and
such foreign currencies or currency units.
The principal, premium, interest or other payments on Debt Securities may
be determined by reference to an index, formula or other method. Such an index,
formula or other method may be based, without limitation, on the price of one or
more commodities, derivatives or securities; a securities or commodities
exchange index; a foreign currency or currencies; or any other variable or
variables. If we issue Debt Securities the payments on which are based on such
an index, formula or other method, the applicable Prospectus Supplement will
describe that index, formula or other method and certain special federal income
tax and other considerations applicable to such Debt Securities.
REGISTERED SECURITIES
As noted above, unless we tell you in a Prospectus Supplement that the
specific Debt Securities described in that Prospectus Supplement are bearer Debt
Securities, the Debt Securities will be "registered securities". We and the
Trustee may treat the Person in whose name a registered Debt Security is
registered under the Indenture as the owner of that Debt Security for all
purposes, including for the purpose of receiving payments on that Debt Security.
(Section 3.8 of the Indenture.) The Indenture refers to each Person in whose
name a registered Debt Security is registered as the "Holder" of that Debt
Security. (Section 1.1 of the Indenture.)
Except as described below under "Global Debt Securities" or in the
applicable Prospectus Supplement, a Holder can exchange or transfer Debt
Securities in registered form at the office of the Trustee. Initially, the
Trustee will act as our agent for registering such Debt Securities in the names
of Holders and transferring such Debt Securities. We may appoint another entity
at any time to perform this role or we may perform it ourselves. The entity
performing the role of maintaining the list of registered Holders and performing
transfers is called the "Registrar". (Sections 3.5 and 9.2 of the Indenture.)
Unless we tell you otherwise in the applicable Prospectus Supplement, a
Holder seeking to transfer or exchange a registered Debt Security will not be
required to pay a service charge to us, the Registrar or the
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Trustee, but such Holder may be required to pay for any tax or other
governmental charge associated with the transfer or exchange. (Section 3.5 of
the Indenture.)
If you are not the Holder of any Debt Securities in registered form, your
rights relating to those Debt Securities will be governed in part by applicable
laws and by the account rules and policies of the broker, bank or financial
intermediary through which you invest in such Debt Securities and any other
financial intermediary that holds interests directly or indirectly in such Debt
Securities (including any Depositary referred to below under "Global Debt
Securities"). Neither we nor the Trustee has any responsibility for the account
rules, policies, actions or records of any broker, bank or other financial
intermediary through which you hold (directly or indirectly) your beneficial
interest in a Debt Security in registered form.
IF YOU ARE NOT THE HOLDER OF ANY DEBT SECURITIES IN REGISTERED FORM, YOU
SHOULD CONSULT THE BROKER, BANK OR OTHER FINANCIAL INTERMEDIARY THROUGH WHICH
YOU INVEST IN SUCH DEBT SECURITIES FOR INFORMATION ON YOUR RIGHTS IN RESPECT OF
SUCH DEBT SECURITIES. IN PARTICULAR, YOU SHOULD ASK HOW YOU WILL RECEIVE
PAYMENTS, AND WHETHER YOU WILL BE ABLE TO PROVIDE INSTRUCTIONS AS TO HOW SUCH
BROKER, BANK OR OTHER FINANCIAL INTERMEDIARY SHOULD EXERCISE THE RIGHTS OF A
"HOLDER" UNDER THE INDENTURE.
GLOBAL DEBT SECURITIES
We may specify in the applicable Prospectus Supplement that the Debt
Securities of a series will be issued in the form of fully registered global
securities ("Registered Global Securities"). Registered Global Securities will
be registered in the name of a financial institution we select. This financial
institution, which will be the sole direct Holder of the Registered Global
Securities, is called the "Depositary". We will identify any Depositary in the
applicable Prospectus Supplement. Any person wishing to own a Debt Security
represented by a Registered Global Security must do so indirectly by virtue of
an account with a broker, bank or other financial intermediary that in turn has
an account with the Depositary, or with another financial intermediary that
itself has an account with the Depositary. The Debt Securities represented by
the Registered Global Securities may not be transferred to the name of any other
Holder unless the special circumstances described below occur.
Special Investor Considerations for Registered Global Securities. Our
obligations with respect to Registered Global Securities, as well as the
obligations of the Trustee and those of any third parties employed by us or the
Trustee, run only to Persons who are registered Holders of those Debt
Securities. For example, once a payment on a Registered Global Security is made
to the Depositary, as sole Holder of that Registered Global Security, neither we
nor the Trustee has any further responsibility for that payment even if it is
not passed along to the correct owners of the beneficial interests in that
Registered Global Security.
As long as the Debt Securities are represented by Registered Global
Securities:
- You cannot have Debt Securities registered in your name under the
Indenture.
- You cannot receive physical certificates from us for your interest in the
Debt Securities.
- You must look to your own bank or broker or other financial intermediary
for payments on the Debt Securities.
- You will have no rights as a "Holder" under the Indenture. This means
that, among other things, you will have no right to give any direction,
approval or instruction directly to the Trustee under the Indenture.
- You may not be able to sell interests in the Debt Securities to some
insurance companies and other institutions that are required by law to
own their debt securities in the form of physical certificates.
- The Depositary's policies will govern payments, transfers, exchanges and
other matters relating to the Registered Global Security. We and the
Trustee have no responsibility for any aspect of the Depositary's actions
or for its records of ownership interests in the Registered Global
Security. We and the Trustee also do not supervise the Depositary in any
way. In addition, we and the Trustee have no
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responsibility for the actions or records of any broker, bank, or other
financial intermediary through which you hold (directly or indirectly)
your beneficial interest in the Registered Global Security.
- Payment for purchases and sales in the market for corporate debentures
and notes is generally made in next-day funds. In contrast, the
Depositary will usually require that interests in a Registered Global
Security be purchased or sold within its system using same-day funds.
This difference could have some effect on how Registered Global Security
interests trade, but we do not know what that effect will be.
YOU SHOULD CONSULT THE BROKER, BANK OR OTHER FINANCIAL INTERMEDIARY THROUGH
WHICH YOU INVEST IN DEBT SECURITIES REPRESENTED BY REGISTERED GLOBAL SECURITIES
FOR INFORMATION ON YOUR RIGHTS IN RESPECT OF SUCH DEBT SECURITIES. IN
PARTICULAR, YOU SHOULD ASK HOW YOU WILL RECEIVE PAYMENTS AND WHETHER YOU WILL BE
ABLE TO PROVIDE INSTRUCTIONS AS TO HOW THE DEPOSITARY SHOULD EXERCISE THE RIGHTS
OF A "HOLDER" UNDER THE INDENTURE.
Special Situations When Registered Global Security Will Be Terminated. In
the special situations described in the next paragraph, a Registered Global
Security will terminate and interests in it will be exchanged for physical
certificates representing Debt Securities. After that exchange, we believe that
you likely will be able to choose whether to hold Debt Securities directly in
your own name or indirectly through an account at a bank or broker or other
financial intermediary. However, when a Registered Global Security terminates,
the Depositary (and not AMR or the Trustee) will be responsible for determining
the names of the institutions that will be the initial direct Holders of the
Debt Securities. You must consult your own bank or broker or other financial
intermediary at such time to find out how to have your interests in Debt
Securities transferred to your own name, if you wish to become a direct Holder.
The special situations for termination of a Registered Global Security are:
- When the Depositary notifies us that it is unwilling, unable or no longer
qualifies to continue as Depositary (unless a replacement Depositary is
named).
- We determine not to have any of the Debt Securities of a series
represented by a Registered Global Security and notify the Trustee of our
decision.
(Section 3.5 of the Indenture.) In addition, a Prospectus Supplement may list
situations for terminating a Registered Global Security that would apply only to
the particular series of Debt Securities covered by that Prospectus Supplement.
Bearer Global Securities. The Debt Securities of a series may also be
issued wholly or partially in the form of one or more bearer global securities
(a "Bearer Global Security") that will be deposited with a Depositary, or with a
nominee for such Depositary, identified in the applicable Prospectus Supplement.
Any such Bearer Global Securities may be issued in temporary or permanent form.
(Sections 3.4 and 3.5 of the Indenture.) The applicable Prospectus Supplement
will describe the specific terms and procedures, including the depositary
arrangement, with respect to any portion of a series of Debt Securities to be
represented by Bearer Global Securities.
PAYMENTS
Unless we tell you otherwise in the applicable Prospectus Supplement, we
will generally deposit interest, principal and any other money due on the Debt
Securities, in the designated currency, with the Trustee, and the Trustee will
act as our agent for making payments on the Debt Securities. We may change this
appointment to another entity or perform this role ourselves. The entity
performing the role of making payments is called the "Paying Agent". We may, at
our option, make any interest payments on Debt Securities in registered form by
having the Trustee mail checks or make wire transfers to the registered Holders
listed in the Registrar's records. (Sections 3.7(a) and 9.2 of the Indenture.)
IF YOU ARE NOT THE HOLDER OF ANY DEBT SECURITIES IN REGISTERED FORM, YOU MUST
MAKE YOUR OWN ARRANGEMENTS WITH THE BANK, BROKER OR OTHER FINANCIAL INTERMEDIARY
THROUGH WHICH YOU INVEST IN SUCH DEBT SECURITIES TO RECEIVE PAYMENTS.
Unless we tell you otherwise in the applicable Prospectus Supplement,
interest will be payable to each Holder listed in the Registrar's records at the
close of business on a particular day in advance of each due
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date for interest, even if such Holder no longer owns the Debt Security on the
interest due date. That particular day is called the "Record Date" and will be
stated in the Prospectus Supplement. (Section 3.7(a) of the Indenture.) Persons
buying and selling Debt Securities between a Record Date and an interest payment
date must work out between them how to compensate for the fact that we will pay
all the interest for an interest period to the registered Holder on the Record
Date.
Unless we tell you otherwise in the applicable Prospectus Supplement,
interest payable on any Debt Security in registered form that is not punctually
paid or duly provided for on any interest payment date will cease to be payable
to the Holder in whose name such Debt Security is registered on the relevant
Record Date. Such defaulted interest will instead be payable to the person in
whose name such Debt Security is registered on the special record date or other
specified date determined in accordance with the Indenture. (Section 3.7(b) of
the Indenture.)
We will make payments on Debt Securities in bearer form in the currency and
in the manner designated in the applicable Prospectus Supplement, subject to any
relevant laws and regulations, at such paying agencies outside the United States
as we may appoint from time to time. The Paying Agents outside the United States
initially appointed by us for a series of Debt Securities will be named in the
applicable Prospectus Supplement.
We may at any time designate additional Paying Agents or rescind the
designation of any Paying Agents, except that, if Debt Securities of a series
are issuable as Registered Securities, we will be required to maintain at least
one Paying Agent in each Place of Payment for such series and, if Debt
Securities of a series are issuable as Bearer Securities, we will be required to
maintain a Paying Agent in a Place of Payment outside the United States where
Debt Securities of such series and any related coupons may be presented and
surrendered for payment. (Section 9.2 of the Indenture.)
NOTICES
AMR and the Trustee will send notices regarding Debt Securities in
registered form only to registered Holders, using their addresses as listed in
the Registrar's records. IF YOU ARE NOT THE HOLDER OF DEBT SECURITIES IN
REGISTERED FORM, YOU SHOULD CONSULT THE BROKER, BANK OR OTHER FINANCIAL
INTERMEDIARY THROUGH WHICH YOU INVEST IN SUCH DEBT SECURITIES FOR INFORMATION ON
HOW YOU WILL RECEIVE SUCH NOTICES. Holders of Bearer Debt Securities will be
notified by publication as described in the Prospectus Supplement relating to
such Debt Securities. (Section 1.6 of the Indenture.)
CONSOLIDATION, MERGER OR SALE BY AMR
The Indenture generally permits AMR to consolidate or merge with or into
another company or entity and to sell or otherwise dispose of all or
substantially all of its assets. However, we may not take any of these actions
unless all the following conditions are met:
- where we merge out of existence or sell or otherwise dispose of our
assets, the other firm must be a corporation, limited liability company,
partnership, trust or other Person organized and existing under the laws
of the United States of America or a State thereof, and it must agree to
be legally responsible for all of AMR's obligations under the Debt
Securities and the Indenture;
- the transaction must not cause a default on the Debt Securities and AMR
must not already be in default (for this purpose, a "default" is an event
that with notice or passage of time would become an Event of Default);
and
- AMR must deliver certain certificates and documents to the Trustee.
The remaining or acquiring Person after any such transaction will be
substituted for AMR under the Indenture and the Debt Securities, and all
obligations of AMR will terminate. (Section 7.1 of the Indenture.)
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EVENTS OF DEFAULT, NOTICE AND CERTAIN RIGHTS ON DEFAULT
The term "Event of Default" means, with respect to Debt Securities of any
series, any of the following:
- We fail to pay interest on a Debt Security of such series within 30 days
of its due date.
- We fail to pay principal or any premium on a Debt Security of such
series, or we fail to deposit any mandatory sinking fund payment, within
10 days of its due date.
- We remain in breach of a covenant in the Indenture for 60 days after we
receive a notice of default stating we are in breach. The notice must be
sent by either the Trustee or the Holders of at least 25% of the
principal amount of the Debt Securities of the affected series.
- We file for bankruptcy or certain other events of bankruptcy, insolvency
or reorganization occur.
- Any other "Event of Default" described in the applicable Prospectus
Supplement occurs.
(Section 5.1 of the Indenture.) An Event of Default for a particular series of
Debt Securities will not necessarily constitute an Event of Default for any
other series of Debt Securities issued under the Indenture.
The Indenture requires the Trustee to notify Holders of the applicable
series of Debt Securities of any uncured Default within 90 days after such
Default occurs. The Trustee may withhold notice, however, of any Default (except
in the payment of principal or interest) if it considers such withholding of
notice to be in the Holders' best interests. (Section 6.5 of the Indenture.)
If an Event of Default has occurred and has not been cured, the Trustee or
the Holders of at least 25% in principal amount of the Debt Securities of the
affected series may declare the entire principal amount (or, if the Debt
Securities of that series are original issue discount Debt Securities or Debt
Securities payable in accordance with an index, formula or other method, such
portion of the principal amount or other amount specified in the Prospectus
Supplement) of all the Debt Securities of that series to be due and immediately
payable. (Section 5.2 of the Indenture.) The Holders of a majority in principal
amount of the Debt Securities of the affected series may waive, on behalf of the
Holders of all Debt Securities of such series, any past Default or Event of
Default with respect to that series and its consequences, except a Default or
Event of Default in the payment of the principal of or any premium or interest
on any Debt Security and certain other defaults. (Section 5.7 of the Indenture.)
The Holders of a majority in principal amount of the Debt Securities of the
affected series (with the Debt Securities of each such series voting as a class)
may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee for such series, or exercising any trust or
power conferred on such Trustee with respect to the Debt Securities of such
series, as long as such direction does not conflict with any law or the
Indenture and subject to certain other limitations. (Section 5.8 of the
Indenture.)
Before a Holder can bypass the Trustee and bring its own lawsuit or other
formal legal action or take other steps to enforce its rights or protect its
interests relating to the Debt Securities, the following must occur:
- such Holder must give the Trustee written notice that an Event of Default
has occurred and remains uncured;
- the Holders of at least 25% in principal amount of all Debt Securities of
the relevant series must request the Trustee in writing to take action
because of the Event of Default, and must offer an indemnity to the
Trustee against the cost and other liabilities of taking that action;
- the Trustee must not have taken action for 60 days after receipt of the
above notice, request and indemnity; and
- the Holders of a majority in principal amount of the Debt Securities of
that series must not have given the Trustee a direction inconsistent with
the above notice.
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(Section 5.9 of the Indenture.)
However, a direct Holder is entitled to bring a lawsuit at any time for the
payment of principal, premium, if any, and interest due on its Debt Securities
after the due date. (Section 5.10 of the Indenture.)
IF YOU ARE NOT THE HOLDER OF DEBT SECURITIES IN REGISTERED FORM, YOU SHOULD
CONSULT THE BROKER, BANK OR FINANCIAL INTERMEDIARY THROUGH WHICH YOU INVEST IN
SUCH DEBT SECURITIES FOR INFORMATION ON YOUR RIGHTS IN RESPECT OF THOSE DEBT
SECURITIES FOLLOWING AN EVENT OF DEFAULT.
We will file annually with the Trustee a certificate as to AMR's compliance
with all conditions and covenants of the Indenture. (Section 9.7 of the
Indenture.)
MODIFICATION OF THE INDENTURE
There are three categories of changes we can make to the Indenture and the
Debt Securities.
Changes Requiring Approval of Each Affected Holder. First, there are
changes that cannot be made to Debt Securities of any series without the
approval of each Holder of Debt Securities of the series affected by such
change. Following is a summary of those changes:
- to change the time for payment of principal of or interest on a Debt
Security;
- to reduce the amounts of principal of or interest on a Debt Security;
- to reduce the amount of any premium payable upon the redemption of a Debt
Security;
- to reduce the amount payable upon acceleration of the maturity of an
original issue discount Debt Security or a Debt Security payable in
accordance with an index, formula or other method;
- to change the currency of payment on a Debt Security;
- to impair the right to sue for payment on a Debt Security;
- to reduce the percentage of Holders of Debt Securities of such series
whose consent is needed to modify or amend the Indenture or to waive
compliance with certain provisions of the Indenture or to waive certain
defaults;
- to change the obligation of AMR to maintain an office or agency in the
places and for the purposes specified in the Indenture; or
- to modify the provisions relating to waiver of certain defaults or
modifications of the Indenture and Debt Securities.
(Section 8.2 of the Indenture.)
Changes Requiring a Majority Vote. The second category of change to the
Indenture and the Debt Securities is the kind that requires a vote in favor by
Holders of Debt Securities owning a majority of the principal amount of each
particular series adversely affected.
Changes Not Requiring Approval. The third category of change does not
require any vote by Holders of Debt Securities. Following is a summary of those
changes:
- to reflect that another corporation or entity has succeeded AMR and
assumed its covenants;
- to add to AMR's covenants, to surrender any right or power of AMR, or to
comply with any SEC requirement in connection with the qualification of
the Indenture;
- to add additional Events of Default with respect to any series;
- to add or change any provisions to the extent necessary to facilitate the
issuance of Debt Securities in bearer form or in global form;
- to change or eliminate any provision affecting Debt Securities not yet
issued;
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- to secure the Debt Securities;
- to establish the form or terms of Debt Securities;
- to provide for the electronic delivery of supplemental indentures or Debt
Securities of any series;
- to evidence and provide for successor or additional Trustees;
- if allowed without penalty under applicable laws and regulations, to
permit payment in respect of Debt Securities in bearer form in the United
States;
- to correct or supplement any inconsistent provisions or to cure any
ambiguity or correct any mistake; or
- to make any other provisions with respect to matters or questions arising
under the Indenture, as long as such action does not adversely affect
Holders of the Debt Securities.
(Section 8.1 of the Indenture.)
IF YOU ARE NOT THE HOLDER OF DEBT SECURITIES IN REGISTERED FORM, YOU SHOULD
CONSULT WITH THE BROKER, BANK OR FINANCIAL INTERMEDIARY THROUGH WHICH YOU INVEST
IN SUCH DEBT SECURITIES FOR INFORMATION ON HOW APPROVAL WILL BE GRANTED OR
DENIED IF WE SEEK TO CHANGE THE INDENTURE OR REQUEST A WAIVER OF ANY OF ITS
TERMS.
DEFEASANCE
Unless we tell you otherwise in the applicable Prospectus Supplement, the
following discussion of full defeasance and covenant defeasance will apply to
each series of Debt Securities. (Article IV of the Indenture.)
Full Defeasance. Under certain circumstances, we can legally release
ourselves from any payment or other obligations on the Debt Securities of any
series (called "full defeasance") if we put in place the following arrangements
for the Holders of those Debt Securities to be repaid:
- we must deposit in trust for the Holders' benefit a combination of money
and Government Obligations that will generate enough money to pay when
due the principal of and any premium or interest on the Debt Securities
of such series and to make any mandatory sinking fund payments on such
Debt Securities; and
- we must deliver to the Trustee a legal opinion of our counsel confirming
that there has been a change in federal tax law as in effect on the date
of this Prospectus or an IRS ruling that lets us make the above deposit
without causing Holders to be taxed on the Debt Securities of such series
any differently than if AMR did not make the deposit and simply repaid
such Debt Securities itself.
(Sections 4.4 and 4.6 of the Indenture.)
If AMR were to accomplish full defeasance, as described above, Holders
would have to rely solely on the trust deposit for repayment on the Debt
Securities of the particular series defeased. Holders could not look to AMR for
repayment if a shortfall occurred.
AMR may exercise its full defeasance option even if it has previously
exercised its covenant defeasance option. If AMR exercises its full defeasance
option, payment of the particular series of Debt Securities defeased may not be
accelerated because of a Default or an Event of Default. (Section 4.4 of the
Indenture.)
Covenant Defeasance. Under certain circumstances, we can make the same type
of deposit described above and be released from some of the restrictive
covenants in the Debt Securities of any series. This is called "covenant
defeasance". In that event, Holders of those Debt Securities would lose the
protection of those restrictive covenants but would gain the protection of
having money and Government Obligations set aside in trust to repay such Debt
Securities. To achieve covenant defeasance, we must do the following:
- we must deposit in trust for the Holders' benefit a combination of money
and Government Obligations that will generate enough money to pay when
due the principal of and any premium or interest on the
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Debt Securities of such series and to make any mandatory sinking fund
payments on such Debt Securities; and
- we must deliver to the Trustee a legal opinion of our counsel confirming
that, under federal tax law as in effect at the time of such deposit, AMR
may make such deposit without causing Holders to be taxed on the Debt
Securities of such series any differently than if AMR did not make the
deposit and simply repaid such Debt Securities itself.
(Sections 4.5 and 4.6 of the Indenture.)
If AMR exercises its covenant defeasance option with respect to the Debt
Securities of a series, certain restrictive covenants of the Indenture and
certain Events of Default would no longer apply to such series. (Section 4.5 of
the Indenture.) If one of the remaining Events of Default occurred, however, and
payment of the Debt Securities of such series was accelerated, there could be a
shortfall between the amount in the trust deposit at that time and the amount
then due on such series. Holders could still look to AMR for payment of such
Debt Securities if there were such a shortfall. Depending on the event causing
the default (such as AMR's bankruptcy), however, Holders may not be able to
obtain payment of the shortfall from AMR.
THE TRUSTEE
Citibank, N.A. ("Citibank") is the Trustee under the Indenture. AMR and
certain of its affiliates currently have credit lines with and borrow funds
from, and have other banking and commercial relationships with, Citibank. In the
future any of AMR and its affiliates may maintain banking and other commercial
relationships with Citibank and its affiliates.
PLAN OF DISTRIBUTION
We may sell Debt Securities from time to time in one or more transactions.
We may sell the Debt Securities of or within any series to or through agents,
underwriters or dealers or directly to one or more purchasers.
AGENTS
We may use agents to sell Debt Securities. Unless we tell you otherwise in
the applicable Prospectus Supplement, the agents will agree to use their
reasonable best efforts to solicit purchases for the period of their
appointment.
UNDERWRITERS
We may sell Debt Securities to underwriters. Unless we tell you otherwise
in the applicable Prospectus Supplement, the underwriters may resell those Debt
Securities in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The obligations of the underwriters to purchase such Debt Securities will be
subject to certain conditions. Each underwriter will be obligated to purchase
all the Debt Securities allocated to it under the underwriting agreement. The
underwriters may change any initial public offering price and any discounts or
concessions they give to dealers.
DIRECT SALES
We may sell Debt Securities directly to purchasers without the involvement
of underwriters or agents.
OTHER MEANS OF DISTRIBUTION
Debt Securities may also be offered and sold, if we so indicate in the
applicable Prospectus Supplement, by one or more firms ("remarketing firms")
acting as dealers or as agents for AMR in connection with a remarketing of such
Debt Securities following their purchase or redemption.
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<PAGE> 23
If we so indicate in the applicable Prospectus Supplement, we may authorize
agents, underwriters or dealers to solicit offers by certain institutions to
purchase Debt Securities from AMR pursuant to delayed delivery contracts
providing for payment and delivery at a future date.
GENERAL INFORMATION
Any underwriters, agents or remarketing firms will be identified and their
compensation described in a Prospectus Supplement.
We may have agreements with any underwriters, dealers, agents and
remarketing firms to indemnify them against certain civil liabilities, including
liabilities under the Securities Act of 1933, or to contribute with respect to
payments they may be required to make.
Any underwriters, dealers, agents and remarketing firms may engage in
transactions with, or perform services for, us or our affiliates in the ordinary
course of their business.
LEGAL OPINIONS
Unless we tell you otherwise in the applicable Prospectus Supplement, the
validity of the Debt Securities offered hereby will be passed upon for AMR by
its Senior Vice President and General Counsel, Anne H. McNamara, and for any
agents, underwriters or dealers by Shearman & Sterling, 599 Lexington Avenue,
New York, New York 10022. Shearman & Sterling from time to time represents AMR
with respect to certain matters.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K/A
No. 1 for the year ended December 31, 1997, as set forth in their reports, which
are incorporated in this Prospectus by reference. Our consolidated financial
statements are incorporated by reference in reliance on their reports, given on
their authority as experts in accounting and auditing.
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No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the PINES offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement
Ratio of Earnings to Fixed Charges...... S-2
Description of the PINES................ S-2
Underwriting............................ S-5
Prospectus
About this Prospectus................... 2
Where You Can Find More Information..... 2
AMR Corporation......................... 4
Use of Proceeds......................... 4
Ratio of Earnings to Fixed Charges...... 5
Description of Debt Securities.......... 6
Plan of Distribution.................... 15
Legal Opinions.......................... 16
Experts................................. 16
</TABLE>
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$150,000,000
AMR CORPORATION
7.875% Public Income NotES
(PINES(SM)) due 2039
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES
CREDIT SUISSE FIRST BOSTON
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