American Airlines  is seeking bankruptcy court approval of a reorganization plan support agreement with unsecured creditors holding roughly $1.6 billion of claims, according to court documents.

The support agreement has been previously disclosed. At the time American announced the terms of its proposed reorganization plan and merger agreement with US Airways on Feb. 14, American said it had entered into the PSA with holders of $1.2 billion of unsecured claims.

The initial parties to the PSA comprised seven members of the ad hoc committee of AMR Corporation creditors – Avenue Capital, Claren Road Asset Management, Cyrus Capital Partners, Morgan Securities, Marathon Asset Management, Pentwater Capital Management, and Solus Alternative Asset Management – and, according to the May 14 motion seeking approval of the PSA, “two other significant stakeholders.”

According to the company’s motion, since the February announcement, 15 additional parties have joined the support agreement, bringing the total amount of represented claims to $1.6 billion.

A hearing on approval of the support agreement is scheduled for June 4, the same day as the scheduled hearing on approval of American’s proposed disclosure statement.

As reported, American’s unsecured creditors will see their claims repaid in full under the proposed plan, with so-called “double-dip” creditors – that is, creditors with claims against both American and AMR Corp. due to cross guarantees – receiving convertible preferred stock that would convert to common stock over a 120-day post-emergence period, according to a formula based on the stock’s market price, and “single-dip” creditors – or creditors with claims against either American, Eagle, or AMR, but not subject to a guarantee that would obligate more than one unit to the creditor – who would receive a combination of the convertible preferred and common equity. – Alan Zimmerman

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Residential Capital has entered into a comprehensive agreement with parent Ally Financial and key stakeholders in its Chapter 11 case to support a reorganization plan, the company announced.

The agreement settles, and releases Ally from, existing and potential claims between ResCap and Ally and potential claims held by third parties in relation to ResCap, the company said. The settlement excludes “certain securities claims by the Federal Housing Finance Agency and the Federal Deposit Insurance Corporation, as receiver for certain failed banks.”

The settlement is subject to approval by the U.S. Bankruptcy Court in Manhattan.

ResCap did not provide any specifics of the deal, saying, “Detailed terms of the plan support agreement will be kept confidential until a motion is filed to approve the plan support agreement later this month.”

According to a separate news release issued today by Ally, the motion seeking approval of the settlement is to be filed next week. But, Ally said, “the economic consideration payable by Ally … is not subject to further negotiation.”

Ally also noted that notwithstanding the settlement, it “believes it has strong defenses against these claims and will vigorously defend its position, as necessary.”

The settlement was reached as part of the mediation in the case being led by Bankruptcy Court Judge James Peck, the companies said.

“The entry into this consensual agreement marks another important step toward bringing the ResCap Chapter 11 proceedings to a conclusion,” ResCap said. Ally chief executive officer Michael Carpenter, meanwhile, called the agreement a “seminal moment” for his company.

Ally’s potential liability to ResCap and, derivatively, its creditors, is a central issue in the proceedings. The crux of the dispute is whether Ally, using its corporate control over ResCap and its management, wrongfully engineered certain transactions beginning in 2006 that transferred key ResCap assets out of the reach of creditors in the wake of the housing market meltdown, leaving ResCap insolvent and leading to its bankruptcy, filed one year ago today.

At the time it filed Chapter 11, ResCap and Ally had agreed to a purported $750 million settlement of the potential claims. Key ResCap creditors, however, balked, with the creditors’ committee beginning its own investigation into the transactions and the bankruptcy court appointing an examiner to look into the transactions.

Subsequently, the creditors’ committee sought derivative standing – supported by the company – to file suit arising out of the transactions, arguing that Ally’s liability could potentially cover all claims in the case, from $20-25 billion (see “ResCap cred panel seeks OK to sue AFI; liability may be $20-25B ,” LCD News, April 12, 2013).

The examiner, former Bankruptcy Court Judge Arthur Gonzalez, finally filed his long-awaited report yesterday with the bankruptcy court, albeit it under seal, in order to promote the consensual resolution. In light of the comprehensive settlement, Gonzalez’s report will remain under seal at least through May 21, and if the company files a motion seeking approval of a plan-support agreement by that date, then Gonzalez’s report would remain sealed through July 3.

Besides ResCap and Ally, other key stakeholders that are parties to the settlement include the official unsecured-creditors’ committee, Wilmington Trust (which is the indenture trustee for nearly $1 billion in ResCap notes), AIG Asset Management, Allstate Insurance Co. FGIC, representatives of litigants in various class action suits pending against ResCap, certain RMBS investors related to securitizations backed by the company, and certain trustees or indenture trustee for certain mortgage backed securities trusts. – Alan Zimmerman

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