MOODY’S DOWNGRADES AMERICAN AIRLINES’ DEBTS

MOODY’S DOWNGRADES AMERICAN AIRLINES’ DEBTS

   Moody’s Investors Service has downgraded the debts of AMR Corp. and its subsidiary American Airlines.

   The lower rating affects approximately $13 billion in debt securities.

   Moody’s said that its downgraded AMR’s senior implied rating to B3 from B1; it also downgraded AMR’s and American’s senior unsecured rating to Caa2 from B2. The credit rating agency also lowered the rating of other debt securities issued by the AMR group.

   “The ratings downgrade reflects the continued deterioration in financial strength at AMR Corp and American Airlines… due to a prolonged period of negative cash flow and the outlook for continued cash losses absent a significant reduction in the company’s cost structure,” Moody’s said. “While American retains $2.8 billion of balance sheet cash, a pronounced reduction in financial flexibility has occurred,” it added.

   Moody’s started reviewing AMR in January 2002. The continuation of the review “reflects Moody’s concern with increasing demands on the company’s limited financial resources, the limited potential for a near term recovery in the company’s revenues and its continued high costs,” it commented.