Accounting & Investing Info for San Antonio A & M
Monday Oct 3, 2011
I used American Airlines AMR as an example of a weak balance sheet in class. I the ACCT 3301 TR class someone asked who would lend them money, good question! Surprisingly the demand for airline bonds is still strong. Selling bonds to finance the aircraft is about the same as signing the long term lease. The collateral is the airplane.
Still this is a good discussion of AMR liquidity and whether AMR could would should take bankruptcy.
I think it is funny that companys will still loan money out to them. What would they do with the airplane if the company did go under anyways?
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I agree with Colton, I think that those who are lending the money to American Airlines are not thinking on the loss they are going to have. And as Colton asked what are they going to do with the airplane when they get it instead of their money?
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There is such a thing as a supre priority lien in bankruptcy, and if AMR takes chapter 11, reorganization, which is probable, they are not calling it quits, they will still be flying the airplanes, AMR is not a chapter 7 which is kaput!
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I agree with laura and colton. I dont understand how a company can loan out its money knowing that the other company is doing bad. Its hard to understand the logic of the situation.
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AMR has to keep flying to make the payments on the leased airplanes, this is a situation of
we are all in this together, AMR runs out of money then no one gets paid
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Taking risks is the way America does business. I would think after bank failures and losses is the billion several years ago, the investor would think different.
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Professor Elam 
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