Item 1.01. Entry into a Material Definitive Agreement
On April 29, 2016 (the Closing Date), American Airlines, Inc. (American) and American Airlines Group Inc.
(AAG), entered into a Credit and Guaranty Agreement (the Credit Agreement), among American, as the borrower, AAG, as parent and guarantor, the lenders party thereto, and Barclays Bank PLC, as administrative agent and
collateral agent. The Credit Agreement provides for a $1 billion term loan facility (the Term Loan Facility) and a revolving credit facility that may be established in the future (the Revolving Credit Facility).
On the Closing Date, American borrowed $1 billion under the Term Loan Facility. The proceeds of the Term Loan Facility were used to repay
approximately $588 million in remaining principal plus accrued and unpaid interest of the Tranche B2 Term Loans under that certain Loan Agreement dated as of May 23, 2013, as amended, by and among American, AAG, certain other affiliates of
American, the lenders party thereto and Citicorp North America, Inc., as administrative agent and the remainder will be used for general corporate purposes. Term loans under the Credit Agreement mature on April 28, 2023.
Voluntary prepayments may be made by American at any time, with a premium of 1% applicable to certain prepayments made prior to the date that
is six months following the Closing Date. Mandatory prepayments at par of term loans and/or revolving loans (if any) under the Credit Agreement are required to the extent necessary to comply with Americans covenants regarding the collateral
coverage ratio and certain dispositions of the Collateral (as defined herein). In addition, if a change of control (as defined in the Credit Agreement) occurs with respect to AAG, American will be required to repay at par the loans
outstanding under the Credit Agreement and terminate any Revolving Credit Facility.
Borrowings under the Term Loan Facility bear interest
at an index rate plus an applicable index margin or, at Americans option, LIBOR (subject to a floor of 0.75%) plus an applicable LIBOR margin for interest periods of one, three or six months (or, if available to all affected Lenders, 12 months
or a shorter period). The LIBOR margin is 2.75% for borrowings under the Term Loan Facility.
The obligations of American under the Credit
Agreement are secured by a lien on aircraft spare parts owned by American (the Collateral). American has the ability to add certain types of assets to the Collateral and, subject to certain conditions, release Collateral, in each case
from time to time at its discretion.
The Credit Agreement requires American to periodically appraise the value of the Collateral and
calculate the collateral coverage ratio. If the calculated collateral coverage ratio is below 1.6 to 1.0, American may be required either to provide additional Collateral (which may include cash collateral) to secure its obligations under the Credit
Agreement or repay the loans under the Credit Agreement or certain other indebtedness, in such amounts that the recalculated collateral coverage ratio, after giving effect to any such additional collateral or repayment, is at least 1.6 to 1.0.
The Credit Agreement also includes affirmative, negative and financial covenants that, among other things, limit the ability of AAG and its
restricted subsidiaries to pay dividends and make certain other payments, make certain investments, incur liens on the Collateral, dispose of the Collateral, enter into certain affiliate transactions and engage in certain business activities, in
each case subject to certain exceptions. In addition, under the Credit Agreement, AAG must maintain a minimum aggregate liquidity of $2.0 billion.
The Credit Agreement contains events of default customary for similar financings, including cross-default to other material indebtedness. Upon
the occurrence of an event of default, the outstanding obligations under the Credit Agreement may be accelerated and become due and payable immediately.
American and AAG have a number of other commercial relationships with the lenders and other parties to the Credit Agreement. From time to
time, several of such lenders and parties or their affiliates perform investment banking and advisory services for, and furnish general financing and banking services to, American, AAG and their affiliates.