American Airlines Parent AMR in Bankruptcy, U.S. Stocks Higher

Arthi Gupta
29 Nov, 2011
New York City

The U.S. indexes gained on optimism of a resolution to the European debt crisis. Fitch affirmed its highest rating to the U.S. debt and the decision is questioned by many investors. KKR agreed to acquire Capital Safety for $1.1 billion.

[R]10:10 AM New York – The U.S. indexes gained on optimism of a resolution to the European debt crisis. Fitch affirmed its highest rating to the U.S. debt and the decision is questioned by many investors. KKR agreed to acquire Capital Safety for $1.1 billion.[/R]

U.S. indexes extended gains after better-than-estimated Thanksgiving sales over the weekend. However, Fitch Ratings revised down the outlook on the U.S. credit rating to 'negative' on Monday, affirming the AAA sovereign rating.

European indexes edged higher on optimism that the euro zone finance ministers meeting later today in Brussels will finalize the region's bailout fund. Italy paid record yields in an auction of €7.5 billion of bonds today.

Moody's Investors Service warned that it could downgrade the subordinated and junior debt of 87 European banks, citing the governments' inability to support them amid the region's mounting sovereign-debt problems.

In Asia, Japan’s unemployment rate increased to a three-month high of 4.5% in October from 4.1% in September, the statistics bureau said on Tuesday in Tokyo.

Japanese manufacturers shed 210,000 jobs in October from a year earlier, today’s report showed.

Separately, retail sales in Japan rose 1.9% on year in October, the Ministry of Economy, Trade and Industry said on Tuesday, coming in at 11.009 trillion yen.

U.S. Home Prices Drop

Home prices in major U.S. metropolitan areas fell more than estimated in September, according to a report released by Standard & Poor's on Tuesday.

The report showed that the S&P/Case-Shiller 20-City Composite Home Price Index fell 0.6% in September after dropping 0.3% in August.

AMR Files for Bankruptcy

AMR Corporation, the parent company of American Airlines, Inc. and AMR Eagle Holding Corporation announced that in order to achieve a cost and debt structure that is industry competitive has filed for Chapter 11 bankruptcy protection in a New York court.

AMR is forecast to report its fourth straight year of losses in 2011, after losing $2.12 billion in 2008, $1.47 billion in 2009 and $471 million in 2010.

In mid-October, AMR reported a loss for the third quarter compared to a profit last year, reflecting a 41% surge in fuel costs and adverse impact of foreign exchange rates.

AMR said in a federal court filing in Manhattan said as of Sept 30 the company has $24.7 billion assets and $29.6 billion in debt. The company also has $4.1 billion in cash and cash equivalent that could be used to pay suppliers.

Fitch Affirms U.S. Rating

Fitch Ratings affirmed the United States long-term foreign and local currency Issuer Default Ratings and Fitch-rated U.S. Treasury security ratings at 'AAA', reflecting “strong economic and credit fundamentals.”

However, the rating outlook on the long-term rating is revised to negative from stable.

Fitch said the negative outlook reflects its declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path after the failure of the debt panel to agree at least $1.2 trillion of measures to cut the federal budget deficit over the next 10 years.

KKR to Acquire Capital Safety

Kohlberg Kravis Roberts & Co. L.P., the investment firm said it agreed to acquire Capital Safety, a maker of fall protection equipment, from Arle Capital Partners for $1.12 billion.

Facebook Contemplates IPO

Facebook Inc. is reportedly contemplating raising $10 billion in an initial public offer that could value the social networking site at more than $100 billion.

Facebook is considering a listing between April and June next year, according to a Wall Street Journal report.

Earnings Review

Copart, Inc. ((CPRT)), the online vehicle auctioneer said first quarter total revenues grew 6% to $225.6 million from $212.7 million last year. Net income in the quarter increased 8.8% to $41 million or 62 cents per diluted share compared to net income of $37.8 million or 45 cents per share last year.

Hillenbrand, Inc. ((HI)), the funeral service products company said fourth quarter revenue rose 9% to $231 million for the quarter, from $212 million last year. Net income in the quarter increased 17.5% to $23.5 million or 38 cents per diluted share compared to net income of $20 million or 32 cents per share last year.

Thor Industries, Inc. ((THO)), the recreation vehicle maker reported first quarter sales grew 11% to $673.00 million from $606.68 million last year. Net income in the quarter dropped 5.6% to $22.36 million or 41 cents per diluted share compared to net income of $23.69 million or 44 cents per share last year.

Tiffany & Co. ((TIF)), the luxury-jewelry retailer reported third quarter worldwide net sales increased 21% to $821.77 million from $681.73 million in the same quarter last quarter. Net earnings in the quarter soared 63% to $89.69 million or 70 cents per diluted share compared to net earnings of $55.08 million or 43 cents per share in the prior-year quarter.