Equity Claim Q&A
APRIL 2014 - Legacy American
1. Why are we receiving an equity distribution for Day 120?
As we’ve shared before, eligible employees, had the potential to receive a Day 120 distribution depending on how the AAL share price performed (moved up or down) over the entire 120-day period. The Day 120 distribution to the American employee groups is to ensure they receive 23.6 percent of all of the shares distributed to holders of allowed unsecured claims.
2. I thought the Day 120 distribution was going to be comparable to the Day 1 distribution. Why isn’t that the case?
American’s employee groups are entitled to
receive 23.6 percent of all shares of common stock distributed to unsecured
creditors to satisfy their claims. Since the price of AAL common stock has
increased significantly since the close of the merger, it has taken
considerably fewer shares of common stock to satisfy allowed claims of
unsecured creditors.
As American’s employee groups’ total distribution is based on the amount of shares distributed to unsecured creditors, this has the effect of reducing the total number of shares that are distributed to American’s employee groups. Because American’s employee groups already received a large number of shares on the Effective Date (Day 1 distribution), the number of remaining shares for American’s employee groups for the Day 120 distribution decreased.
3. Will there be any additional distributions?
There could be small distributions post-Day
120 depending upon the resolution of the Disputed Claims Reserve.
4. What is the timing for resolution of the Disputed Claims Reserve?
Unfortunately, there is no definitive deadline for the
resolution of the disputed claims process. However, the earliest the first
distribution can take place is Day 180.
5. When will we receive and be able to sell or transfer our Day 120 shares?
In preparation for the distribution, the “Employee Grants and Awards” section of Computershare accounts will be unavailable beginning April 8, though existing shares under the “Employee Plan Stock” section may continue to be sold and transferred until April 9 at 3 p.m. CDT. After that time, both sections and the call center’s ability to transact via phone will be unavailable. Both sections will be available again on April 10 at 8:30 a.m. CDT.
6. In connection with distributions in respect of prior Mandatory Conversion Dates, we were able to view, but not transact on, our shares as of the Mandatory Conversion Date, why is this distribution different?
The actual processing of distributions in
respect of the 120-day Mandatory Conversion Date is the same as that for prior
distributions with respect to the 30-day, 60-day and 90-day Mandatory
Conversions Dates.
Under the Plan of Reorganization, all distributions relating to a Mandatory Conversion Date are required to occur on, or as soon as administratively practical after, such date. Given the complex nature of each distribution, the administrative processing begins on the Mandatory Conversion Date, but the shares are not actually distributed and available to each recipient until two days later.
The only difference in this case is that the shares to be distributed will not be seen in advance of the date the shares are actually distributed and available (April 10). This is similar to the initial distribution on the Effective Date. As on the Effective Date, distributions with respect to the 120-day Mandatory Conversion Date are also being made to holders of Single-Dip General Unsecured Claims. As such, there is greater coordination required and significantly more shares to be distributed with respect to the 120-day Mandatory Conversion Date. All distributions with respect to Union Claims, Single-Dip General Unsecured Claims and AMR Equity Interests are being made on April 10.
7. How can I access my shares?
As was the case with all previous distributions, your
shares will be distributed into your Computershare account, which is accessible
by first logging into your retireonline.com account with J.P.
Morgan.
8. How will the Day 120 distribution be taxed?
These shares are considered wages for
purposes of federal and state income taxes and FICA in the year in which they
are distributed to you, and are subject to required withholding of taxes. With
that in mind, American will withhold enough shares to cover necessary taxes and
distribute the remainder to eligible employees.
With tax season closing soon, you may be wondering how the equity distribution fits in. Any equity distributed to an employee in 2013 was included as wages in that employee’s 2013 Form W-2 issued this year, while 2014 distributions will be reported on the 2014 W-2. Also, any employee-initiated sales that occurred in 2013 will be reported on a 1099-B form, and will be mailed to you by your broker. If you made your sale with Computershare, you should have received a 1099-B form from them by now. If you transferred your shares to another broker and subsequently made a sale, you will receive the form from that broker. For more information, visit the Taxes and Fees section of the Equity Hub.
9. Why was FICA withheld from my Day 120 distribution if I already reached the FICA maximum for 2014 before or with the Day 120 distribution?
You may have experienced
unnecessary FICA withholding as a result of the timing of the Day 120
distribution. If you already reached the FICA max prior to or as part of the
Day 120 distribution, additional FICA withholding will be refunded on future
payroll checks as part of true-up process that occurs in Payroll. We expect
these corrections to be made by April 30 as part of
the next payroll cycle.
10. When will I be able to see the value of my shares and tax withholding information in ePays?
You will be able to view this information by end of day
on Sunday, April 13.
11. Are legacy US Airways employees eligible for the equity distribution now that the merger has closed?
No. The equity distribution applies only to eligible
U.S.-based legacy American employees.
1. Why are we receiving an equity distribution on Day 90?
Under the Plan of Reorganization (POR), certain creditors could elect to be treated as old AMR equity holders. Many made that election, which reduced the size of the unsecured claims pool. While U.S.-based legacy American employee groups are entitled to receive 23.6 percent of the total shares of new common stock distributed to holders of allowed unsecured claims (including Labor), the POR ensures legacy U.S.-based American’s employee groups will not be disadvantaged by these elections. The allocation allotted to American’s employee groups will be calculated as if the elections were never made. As a result, a distribution will be made to legacy U.S.-based American employee groups on Day 90 to account for the elections and resulting reduction in the claims pool. This same mechanism will also come into play on Day 120.
2. Does this mean that there will also be a distribution on Day 120?
Yes. In addition to a Day 120 distribution, there could be small distributions post-Day 120 depending upon the resolution of the Disputed Claims Reserve.
3. When will we receive our shares?
Eligible employees will be able to sell or transfer shares beginning March 10, though they may see their shares in their accounts under “Employee Grants and Awards” as early as March 8.
4. Why aren’t all employees that are eligible for the equity distribution receiving shares for the Day 90 distribution?
While we will not know the final total number of shares until after the shares are distributed to eligible employees, we expect the fourth distribution to eligible employees to total approximately 0.75 million shares of new common stock, which is very similar, but slightly smaller than the Day 30 and Day 60 distributions. It's important to note that because the company can only issue a whole number of shares, not all employees will receive shares and for those who do, the distribution will be smaller than the initial distribution.
5. I received shares with the initial distribution. Does that mean I will receive shares for the Day 90 distribution?
Not necessarily. We expect the fourth distribution to eligible employees to total approximately 0.75 million shares of new common stock. It’s important to note that because this is a small distribution and because the company can only issue a whole number of shares, not all employees will receive shares and for those that do, this distribution will be smaller than the initial distribution.
Simply put, an employee that received shares for the initial distribution may not receive shares for the Day 90 distribution due to the size of the total Day 90 share distribution.
6. How can I access my shares?
As was the case with all previous distributions, your shares will be distributed into your Computershare account, which is accessible by first logging into your retireonline.com account with J.P. Morgan. Eligible employees will be able to sell or transfer shares beginning March 10, though they may see their shares in their accounts under “Employee Grants and Awards” as early as March 8.
7. How will the Day 90 distribution be taxed?
These shares are considered wages for purposes of federal and state income taxes and FICA in the year in which they are distributed to you, and are subject to required withholding of taxes. With that in mind, American will withhold enough shares to cover necessary taxes and distribute the remainder to eligible employees.
Now that we’re in tax season, you may be wondering how the equity distribution fits in. Any equity distributed to an employee in 2013 was included as wages in that employee’s 2013 Form W-2 issued this year, while 2014 distributions will be reported on the 2014 W-2. Also, any employee-initiated sales that occurred in 2013 will be reported on a 1099-B form, and will be mailed to you by your broker. If you made your sale with Computershare, you should have received a 1099-B form from them by now. If you transferred your shares to another broker and subsequently made a sale, you will receive the form from that broker. For more information, visit the Taxes and Fees section of the Equity Hub.
8. When will I be able to see the value of my shares and tax withholding information in ePays?
You will be able to view this information by end of day on Tuesday, March 11.
9. Are legacy US Airways employees eligible for the equity distribution now that the merger has closed?
No. The equity distribution applies only to eligible U.S.-based legacy American employees.
American Eagle
1. Why aren’t American Eagle’s unionized employees receiving a distribution on Day 90?
Similar to the Day 30 and Day 60 distributions, this provision in the POR applies only to the new common stock distribution for American’s employee groups, as their distribution is dependent on the amount of shares that all unsecured creditors receive. The claim for American Eagle’s unionized employees is a fixed value and not affected by the creditors’ elections.
1. Q: Why are we receiving an equity distribution on Day 60?
A: Under the Plan of Reorganization (POR), certain creditors could elect to be treated as old AMR equity holders. Many made that election, which reduced the size of the unsecured claims pool. While U.S.-based legacy American employee groups are entitled to receive 23.6 percent of the total shares of new common stock distributed to holders of allowed unsecured claims (including Labor), the POR ensures legacy U.S.-based American’s employee groups will not be disadvantaged by these elections. American’s employee groups’ allocation will be calculated as if the elections were never made. As a result, a distribution will be made to legacy U.S.-basedAmerican employee groups on Day 60 to account for the elections and resulting reduction in the claims pool. This same mechanism will also come into play on Days 90 and 120.
2. Q: Does this mean that there will also be a distribution on Day 90?
A: There is a possibility there could be an additional small distribution of new common stock on Day90, but any such distribution is, for the most part, dependent on the trading price of the new common stock, and for various reasons, is less likely than a Day 120 distribution. In addition, there could be small distributions post-Day 120 depending upon the resolution of the Disputed Claims Reserve.
3. Q: When will we receive our shares?
A: Eligible employees will be able to sell or transfer shares beginning Feb. 10, though they may see their shares in their accounts under “Employee Grants and Awards” as early as Feb. 7.
4. Q: Why aren’t all employees eligible for the equity distribution receiving shares for the Day 60distribution?
A: While we will not know the final total number of shares until after the shares are distributed to eligible employees, we expect the third distribution to eligible employees to total approximatelyone million shares of new common stock, which is very similar to the Day 30 distribution. It'simportant to note that because the company can only issue a whole number of shares, not all employees will receive shares and for those who do, the distribution will be smaller than the initialdistribution.
5. Q: I received shares with the initial distribution. Does that mean I will receive shares for the Day 60 distribution?
A: We expect the third distribution to eligible employees to total approximately one million shares of new common stock. It’s important to note that because this is a small distribution and becausethe company can only issue a whole number of shares, not all employees will receive shares and for those that do, this distribution will be smaller than the initial distribution.
Simply put, an employee that received shares for the initial distribution may not receive shares for the Day 60 distribution due to the size of the total Day 60 share distribution.
6. Q: How can I access my shares?
A: As was the case with all previous distributions, your shares will be distributed into your Computershare account, which is accessible by first logging into your retireonline.com account with J.P. Morgan. Eligible employees will be able to sell or transfer shares beginning Feb. 10, though they may see their shares in their accounts under “Employee Grants and Awards” as early as Feb. 7.
7. Q: How will the Day 60 distribution be taxed?
A: These shares are considered wages for purposes of federal and state income taxes and FICA in the year in which they are distributed to you, and are subject to required withholding of taxes. With that in mind, American will withhold enough shares to cover necessary taxes and distribute the remainder to eligible employees.
Now that we’re in tax season, you may be wondering how the equity distribution fits in. Any equity distributed to an employee in 2013 was included as wages in that employee’s 2013 Form W-2 issued this year, while 2014 distributions will be reported on the 2014 W-2. Also, any employee-initiated sales that occurred in 2013 will be reported on a 1099-B form, and will be mailed to you by your broker. If you made your sale with Computershare, you will receive the 1099-B form from them. Computershare will mail 1099-B forms by Feb. 18. If you transferred your shares to another broker and subsequently made a sale, you will receive the form from that broker. For more information, visit the Taxes and Fees section of the Equity Hub.
8. Q: When will I be able to see the value of my shares and tax withholding information inePays?
A: You will be able to view this information by the end of the day on Monday, Feb. 10.
9. Q: Are legacy US Airways employees eligible for the equity distribution now that the merger has closed?
A: No. The equity distribution applies only to eligible U.S.-based legacy American employees.
DECEMBER 2013
1. Q: What will the Unsecured Creditors of American receive?
A: When American exits bankruptcy, it will merge with US Airways and emerge as a newly combined company (American Airlines Group or “AAG”) that will issue new common stock (a/k/a “equity”) to existing shareholders of US Airways and stakeholders of American. US Airways shareholders will receive 28.0% of the AAG stock and American’s Unsecured Creditors and shareholders (“Existing Shareholders”) will receive the remaining 72.0%. Unsecured Creditors will receive a portion of the 72.0% of AAG stock as consideration for their unsecured claims.
2. Q: Why is Labor (including APFA) receiving stock in NewCo?
A: As part of the concessions provided by Labor in reaching agreements with American, the Company agreed to provide Labor with an allocation of AAG stock. The actual amount that will be received is based on a percentage of the distribution that will be made to Unsecured Creditors.
3. Q: How much of AAG’s stock will be distributed to APFA?
A: As provided for in the Last, Best, Final Offer (“LBFO”), APFA will receive 3.0% of the stock provided to American's Unsecured Creditors. It is important to note that as a result of the merger, the value of AAG stock APFA is expected to receive is anticipated to be greater than the value APFA would have received without the merger.
4. Q: How will the price of AAG’s shares be determined?
A: The Plan of Reorganization and its accompanying Disclosure Statement filed with the Court will estimate the value of AAG, which in turn can be used to estimate the price of AAG shares. Upon or shortly after the date the Company emerges from bankruptcy (the “Effective Date”), the issued and outstanding shares of AAG will begin trading and the price of AAG’s shares will be based on the market’s valuation of AAG.
5. Q: Will American’s Unsecured Creditors and Labor receive all of AAG’s stock?
A: The Plan of Reorganization and its accompanying Disclosure Statement filed with the Court will estimate the value of AAG, which in turn can be used to estimate the price of AAG shares. Upon or shortly after the date the Company emerges from bankruptcy (the “Effective Date”), the issued and outstanding shares of AAG will begin trading and the price of AAG’s shares will be based on the market’s valuation of AAG.
6. Q: How many shares of AAG will APFA receive?
A: The number of AAG shares that APFA will receive will be determined by a number of factors, most notably the trading price of AAG stock for the 120 days following the Effective Date, and ultimately will not be known until approximately 120 days after the Effective Date.
In an illustrative example which assumes the total amount of AAG shares to be approximately 750 million, 72% (or approximately 540 million shares) will be distributed amongst Labor, Unsecured Creditors, and Existing Shareholders. As mentioned above, Existing Shareholders would be entitled to a minimum of approximately 26 million shares of AAG (3.5% of 750 million shares), which would be distributed from the American shares and leave approximately 514 million shares (the “Remaining American Shares”) to be allocated to Labor and Unsecured Creditors of American. APFA would be entitled to 3.0% of the Remaining American Shares that are allocated to Labor and Unsecured Creditors, subject to certain valuation calculations under the Plan of Reorganization. For example, the amount of shares ultimately received may be reduced due to additional distributions to Existing Shareholders beyond the 3.5% (only if the value of AAG stock exceeds certain values) initial distribution and any distributions to employees of AAG under employee incentive plans.
7. Q: How will APFA allocate these shares to the Flight Attendants?
A: On August 29th and September 7, 2012, APFA posted the methodology that will be used in allocating the AAG shares to the Flight Attendants. In summary:
Distribution Formula: An individual Flight Attendant’s share of the distribution will be equal to? her/his total W-2 earnings during the measurement period divided by the aggregate total W-2 ?earnings of all eligible Flight Attendants during the measurement period.
Claims for Prior Early-Out Payments: Upon filing for bankruptcy, American ceased making? monthly payments to individuals entitled to benefits under the 1995 Special Early Out Bridge to? Retirement Program and the 1996 Early Out program, in violation of the APFA CBA. APFA ?asserted claims on behalf of these individuals in its proof of claim filed in the bankruptcy ?proceeding and therefore these claims were settled as part of the LBFO. The amount of these? claims can be ascertained from the terms of the APFA CBA. Accordingly, these claims will be? paid from the Equity Claim at the same pro rata rate as generally paid by American to unsecured? claimants in the bankruptcy proceeding. These claims will be paid before the W-2 based distribution ?formula is applied to allocate the Equity Claim.Administrative Costs: To the extent that there are administrative costs associated with the ?distribution of the claim, the Equity Claim amount may be used to cover these administrative ?costs.
8. Q: When will the Flight Attendants receive their distribution of stock?
A: Distribution of AAG shares to all Unsecured Creditors (this includes Labor) and Existing Shareholders under the Plan of Reorganization will be distributed over a period of 120 days from the Effective Date, and approximately one-half of the total distribution will be made on or within days of the Effective Date. Existing Shareholders will also receive a distribution of AAG common stock on the Effective Date (along with US Airways shareholders) while other Unsecured Creditors (including Labor) will receive a preferred stock allocation on the Effective Date. The remaining allocation of AAG shares to all Unsecured Labor will be distributed on or about the 30th, 60th, 90th and/or 120th day after the Effective Date, with the vast majority being distributed on or around the 120th day.
It is anticipated that the remaining allocation of AAG shares will be made monthly, however, the completion of the distribution will be on the 120th day of AA's emergence from bankruptcy.
9. Q: How will I receive my shares of AAG stock?
A: As it did with the stock options in 2003, AA will establish individual accounts for Flight Attendant into which it will deposit your allocation of shares.
10. Q: Once I receive the shares of AAG stock, can I sell them?
A: Once the stock is deposited you and you alone will have the right to decide if and when you want to sell your shares.
11. Q: How much will the shares of AAG stock be worth after American exits bankruptcy?
A: The Plan of Reorganization and its accompanying Disclosure Statement filed with the Court will estimate the value of AAG, which in turn can be used to estimate the price of AAG shares. Upon or shortly after the date the Company emerges from bankruptcy (the “Effective Date”), the issued and outstanding shares of AAG will begin trading and the price of AAG’s shares will be based on the market’s valuation of AAG.
12. Q: How will the price of AAG’s shares be determined?
A: When AAG stock is issued, it will be listed and traded on the New York Stock Exchange (NYSE), allowing holders of the stock to sell their shares. Those transactions will create a market price for the stock that will change based on trading of the stock. The market price for the stock can change for a number of reasons. Typically, price changes are due to there being a greater number of sellers versus buyers (or vice versa) at a given point in time. Decisions to buy or sell may include, among other things, anticipation of the company’s future earnings prospects; announcement of a significant strategic decision or transaction involving the company; general economic conditions, or other factors that impact investors’ perception of the value of the company.
When American exits bankruptcy and completes its merger with US Airways, it is possible that the price of the new stock could rise or fall materially during the period immediately following its issuance. This can be due to a number of factors, some of which are unique to a company exiting chapter 11. For example, when a large company, like American, exits bankruptcy, and creditors and individuals are given significant amounts of stock in settlement of claims, those creditors and individuals may prefer to have cash rather than hold the stock they receive and will therefore seek to sell it quickly. Holders of shares may also choose to sell for other fundamental reasons such as those mentioned above. If there is less buying activity than selling activity, the price at which those shares would trade will decline until it reaches a level at which more buyers are willing to acquire the shares.
While this information is intended to assist you, it does not constitute investment advice. You should consider consulting an investment adviser to evaluate independently the risks, consequences and suitability of investment decisions.
