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AMR Corporation Message Board

  • wgrsh wgrsh May 15, 2013 9:02 PM Flag

    Getting technical

    This was written up by Richard (Hiep Tran) on world press dot c.. (at $15 for LCC, AAMRQ holders get 3.5%) (Also there may be other clauses in the merger agreement documents that alter the below ... )

    "I will be using numbers provided by JP Morgan for the calculations. We have some variables:

    LCC price: let’s call it X
    LCC shares oustanding: 736.8 million
    AMR liabilities to creditors and employees: $7.565 billion, or $7,565 million
    AMR shares outstanding: $335.3 million

    To simplify, let’s get rid of the millions.

    The value of US Airways is 756.8*X
    The portion allocated to AMR is 72%*756.8*X=530.5*X
    The leftover for AAMRQ shareholders is 530.5*X-7565
    Value per AAMRQ share is (530.5*X-7565)/335.3

    AAMRQ price = 1.582*LCC price – 22.56"

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    • Sorry I did not yet respond to my other post. Yes, you are on right track. Everyone focused on the 3.5% and either didn't see, didn't understand, or chose to ignore the valuation model that was actually based on LCC share price after satisfying claims (creditors, etc). To be clear, I am NOT suggesting this will actually happen, as the plan still has to be accepted and numbers still have to fall into place, but based on the "offered" POR, and based on JPM's calculations, the potential value of AAMRQ shares is directly related to the share price of LCC. The 1.15 share value everyone is talking about is based on a 15 LCC share price. Much like an option, every nickel upwards brings an exponential gain to the potential AAMRQ share value at conversion. At LCC's current 19 range, JPM's estimated value for AAMRQ share is 7.50.

      Does anyone really think this is stupid money pouring into a BK equity that has published a future value of 1.15? No doubt there is plenty of risk here, but it's a pretty good high risk short term bet right now, and may even be worthwhile long term based on the economics of the merger. JMHO. Good luck.

    • Regarding the posted formula: JPM came out with that about a week after the merger announcement. I would check and make sure they didn't change their formula. The author of the article I posted from used JPM figures.

      If you use the "Merger Plan" filed by LCC and AMR, a different result is possible. People should do their own reading on this. It is possible that aamrq will get an additional benefit "only?" from the unsecured creditors holding $1.2 billion and not benefit from the full $6 billion unsecured creditors. In that case, aamrq is overvalued. Following the "Merger Plan" steps filled by LCC/AMR, "I" get the following with LCC at $20.

      If the stock price is at $20 at the time of merger:
      1. unsecured creditors get about 300 million shares ($6 billion/$20)
      2. labor gets 23.6% of that, or 48 million shares (per plan)
      3 lcc gets 208 million shares
      4 aamrq gets 3.5% of total ... say 24 million shares
      plus their extra amount ... which is debatable. I could say an additional 20 million or 100 million ... I think from reading the "Plan" aamrq's benefit only comes from creditors holding $1.2 billion in claims and not the full $6 billion in claims ... The lower amount would imply that aamrq is very over valued, so the higher amount is probably right.

      That gives either 623 million shares or 703 million shares depending on the "Plan" will be implemented. This isn't the full amount of shares, but the merger announcement did say 28/72 subject to the implementation of the "Plan".

      • 1 Reply to wgrsh
      • i came across with this calculation:

        after the merger the company will be about 10% bigger than DAL and adding another 10% premium on top of that to be generous for a 20% premium of DAL mkt cap which currently is 16.08 billion which puts it at a mkt cap of 19.29 billion.

        At that current price if they were to get the bare min of 3.5% that would equate to a price of 2.01 for aamrq.

        At the current price aamrq is assuming their stake will increase to about 11% now and close to 13% if it reaches the 7.5 mark.

 

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