US Airways makes merger offer to AMR

Updated 09 December 2012
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US Airways makes merger offer to AMR

NEW YORK: US Airways Group Inc. has made a formal merger proposal to American Airlines parent AMR Corp. and its creditors that could value the combined airline at around $ 8.5 billion, two people familiar with the matter said on Friday.
Details of the proposal emerged as American Airlines pilots voted to ratify a new union contract on Friday, ending a years-long labor dispute and stabilizing the carrier as it tries to emerge from bankruptcy.
Under an all-stock merger that US Airways proposed in mid-November at a meeting with AMR's unsecured creditors committee, AMR creditors would own 70 percent of the merged company and US Airways shareholders 30 percent, the people said.
US Airways and AMR are negotiating toward a potential merger agreement that the smaller rival hopes could come as soon as January, one of the people added, asking not to be named because the matter is not public.
The combined AMR and US Airways could have a value similar to Delta Air Lines Inc., which has a market capitalization of around $ 8.5 billion, the person said.
At the same time, AMR is still pursuing a plan to emerge from bankruptcy proceedings as an independent airline, which will be compared against the merits of a merger with US Airways, the people said.
The companies have yet to narrow differences on a number of significant issues before any deal could be agreed, including how much of the combined carrier each side should own, the people said.
AMR creditors think they should get an equity stake of closer to 80 percent in a merged entity, rather than the 70 percent proposed by US Airways, the people said. AMR and US Airways also disagree on potential cost and revenue benefits from a merger as well as labor integration challenges, they added.
In a note to American Airlines workers, AMR CEO Tom Horton said the company is weighing whether a merger could "create value for our owners and a positive outcome for our people and our customers. We expect to have a conclusion on this soon."
Representatives of US Airways and the creditors committee declined to comment. The Wall Street Journal reported details of US Airways' proposal earlier on Friday.
The new labor contract, approved by nearly three-quarters of the AMR pilots who voted, gives the Allied Pilots' Association a 13.5 percent equity stake in AMR and offers what the union sees as a path to "industry-standard" pay, union spokesman Dennis Tajer told Reuters.
AMR filed for bankruptcy in November 2011, primarily due to high labor costs, and said it needed to cut those costs by $1 billion a year. It achieved concessions from its ground workers and flight attendants but remained at odds with pilots in bitter labor talks that date to 2006.
AMR creditors had deemed labor peace a major priority, saying uncertainty over contracts could make it difficult for creditors and potential investors to assess the company's post-bankruptcy viability.
Friday's vote could be seen as addressing that concern and providing AMR a clearer path toward exiting Chapter 11.
The pilots had been working under strict labor terms imposed unilaterally by AMR as part of its bankruptcy process while negotiations dragged on. The pilots struck down a previous contract offer in August, which at the time AMR had framed as its "last, best" offer.
How the company will look when it exits bankruptcy is still unclear. The pilots' union says it has lost faith in AMR management, led by Horton, and strongly supports a US Airways takeover.
"This ratified agreement should not in any way be viewed as support for the American standalone plan or for this current management team," Tajer said. "This contract represents a bridge to a merger with US Airways."
At least one large group of bondholders, including JPMorgan Chase & Co., Pentwater Capital Management and York Capital Management, has expressed interest in providing an equity infusion to fund AMR as a standalone entity.
The group was strengthened recently when other significant stakeholders, including Marathon Asset Management, joined forces with it, according to court papers filed by the group on Thursday.


Wealthy Gulf individuals feel more confident about regional prospects

Updated 25 April 2018
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Wealthy Gulf individuals feel more confident about regional prospects

  • “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”
  • Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving.

DUBAI: Survey finds growing optimism on region’s economies, but Saudi investors remain wary.

Wealthy individuals in the Gulf are more optimistic over the future of the region and the global economy compared with last year, and are increasing likely to invest in their own countries and other emerging markets in Asia than in western economies. These are among the main findings of an annual survey by Dubai-based Emirates Investment Bank (EIB), released on Tuesday, of the sentiment among high net worth individuals (HNWIs) in the region. 

After two years of falling confidence, some 60 percent of regional HNWIs now believe things will improve or stay the same. Fewer are pessimistic about both regional and global economic prospects than last year, while nearly 80 percent of respondents said they would prefer to invest in Gulf assets, rather than looking abroad.

The recovering oil price was a big reason for the increasing feel-good factor in the Gulf, according to Khalid Sifri, EIB’s chief executive officer, who added: “Factors like the region’s stability, attractive investment opportunities and low-tax environment are seen as the main drivers behind the growing confidence in the region’s economy.”

After falling below $30 per barrel in early 2016, oil has subsequently recovered to a three-and-a-half-year high, breaching the $75 a barrel mark yesterday for the first time since November 2014.

However, the overall optimism of the survey masks some concerns among regional HNWIs; in Saudi Arabia, 48 percent of respondents said that they saw the regional economic situation improving or staying the same, against 52 percent who felt it was likely to worsen in 2018.The survey was conducted last November and December, when investor sentiment in the Kingdom was affected by the high-profile anti-corruption campaign undertaken against some prominent business people accused of financial wrong-doing. “It may have been affected by that. We shall see what the situation is at the end of this year,” Sifri said. 

Respondents from Kuwait were even more pessimistic. None of the respondents from the country felt that things were going to improve on the investment front this year, while 54 percent said they would worsen. Among the most optimistic were respondents in the UAE, with 57 percent of those surveyed saying they thought the overall outlook was improving. On the long-term global outlook, a total of 78 percent of those surveyed across the region were optimistic about prospects over the next five years, with most citing positive economic and political stability as the reason, along with a smaller number who said oil price stabilization would benefit the world economy. The oil price recovery was the biggest reason for regional optimism. 

The geopolitics of the region was claimed as a big factor in deciding investment decisions, but Saudis were less concerned than others. Only 29 percent in the Kingdom said they were influenced by geo-political events, compared with 83 percent in Qatar and 85 percent in the UAE. 

Oil prices, economic reforms and the introduction of VAT were also factors influencing investment, as was the election of Donald Trump as president of the USA. There has been a big shift in global investor orientation outside the GCC. Nearly half of regional wealthy investors (47 percent) are now looking to Asia, 38 percent to the wider Middle East and North Africa, some 34 percent to Europe and only 17 percent to North America. The survey was conducted among 100 HNWIs with $2 million or more in investable assets.