US Air makes merger offer, AMR pilots approve labor deal

NEW YORK (Reuters) - 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. NEW AMR PILOTS DEAL 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. The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

Read More..

Foreigners seen offering 15-16 billion euros in Greek debt buyback - papers

ATHENS (Reuters) - Foreign investors have offered between 15 and 16 billion euros ($19.4-20.7 billion) of Greek government bonds in a debt buy-back programme, according to an initial estimate given by newspapers on Saturday. The plan is central to efforts by Greece's euro zone and International Monetary Fund lenders to cut its borrowing to manageable levels and unlock aid. The preliminary estimate cited by financial dailies Naftemporiki and Imerisia would suggest the buyback plan is on track to succeed. Under the plan, Athens aims to spend 10 billion euros of borrowed money to buy back bonds with a nominal value of about 30 billion euros ($38.8 billion). Since the bonds would be bought far below their nominal value, the country's net debt burden would fall by about 20 billion euros. The papers said the final figure for offers from foreign investors may increase once Greece's debt agency completes an evaluation of them. A deadline to submit the offers expired on Friday. The newspapers did not say how they had come by the initial numbers. Greek lenders, which hold about 17 billion euros worth bonds, already announced on Friday that they would take part in the buyback.

Read More..

Goldman Sachs fined $1.5 million for trading glitch

WASHINGTON (Reuters) - Goldman Sachs Group Inc was fined $1.5 million to settle charges it failed to supervise its traders and allowing one futures dealer to hide billions in dollars from sight and causing a $118 million loss. Ex-Goldman trader Matthew Marshall Taylor in 2007 camouflaged an $8.3 billion position, manually entering fake trades, the Commodity Futures Trading Commission (CFTC) said on Friday. "Goldman failed to have policies or procedures reasonably designed to detect and prevent the manual entry of fabricated futures trades into its front office systems," the top U.S. derivatives regulator said. "As a result, on seven trading days in November and December 2007, Taylor circumvented Goldman's risk management, compliance, and supervision systems," the CFTC said. In a lawsuit in New York in November, the CFTC sought a $130,000 civil penalty against Taylor, who at the time was a vice president at the bank's Capital Structure Franchise Trading desk, and later went to work for Morgan Stanley. Goldman Sachs took a $118 million loss in unwinding the position in e-mini S&P 500 futures contracts. "Taylor's activity was flagged by our controls on December 14, with no impact to customer funds," Goldman Sachs said in an emailed statement. "Since these events, we have enhanced our controls. We're pleased to have settled this matter." Taylor had established the position on December 13, 2007. Bart Chilton, a Democrat and one the CFTC's commissioners, thought the penalty was too low. "I believe that the monetary penalty should be significantly higher in order to represent a sufficient punishment, as well as to denote a meaningful deterrent to future illegal activity," Chilton said in a statement.

Read More..