Indebtedness

Long-term debt classified as not subject to compromise consisted of (in millions):



	June 30, 2012		December 31, 2011
Secured variable and fixed rate indebtedness due through 2023 (effective rates from 1.00%—13.00% at June 30, 2012)	$	2,769	$	2,952
Enhanced equipment trust certificates due through 2021 (rates from 5.10%—10.375% at June 30, 2012)	1,869		1,942
6.00%—8.50% special facility revenue bonds due through 2036	1,437		1,436
7.50% senior secured notes due 2016	1,000		1,000
AAdvantage Miles advance purchase (net of discount of $110 million) (effective rate 8.3%)	846		890
6.25% senior convertible notes due 2014	—		—
9.0%—10.20% debentures due through 2021	—		—
7.88%—10.55% notes due through 2039	—		—
	7,921		8,220
Less current maturities	1,598		1,518
Long-term debt, less current maturities	$	6,323	$	6,702

The financings listed in the table above are considered not subject to compromise. For information regarding the liabilities subject to compromise, see Note 1 to the Condensed Consolidated Financial Statements.

The Company’s future long-term debt and operating lease payments have changed as its ordered aircraft are delivered and such deliveries have been financed. As of June 30, 2012, maturities of long-term debt (including sinking fund requirements) for the next five years are:



Years Ending December 31 (in millions)	Principal Not Subject to Compromise		Principal Subject to Compromise		Total Principal Amount
Remainder of 2012	$	1,079	$	173	$	1,252
2013	882		192		1,074
2014	744		765		1,509
2015	646		161		807
2016	1,637		226		1,863

Future minimum lease payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of a year as of June 30, 2012, were: remainder of 2012 – $472 million, 2013 – $906 million, 2014 – $830 million, 2015 – $758 million, 2016 – $678 million, and 2017 and beyond – $4.3 billion.

As of June 30, 2012, AMR had issued guarantees covering approximately $1.6 billion of American’s tax-exempt bond debt (and interest thereon) and $4.9 billion of American’s secured debt (and interest thereon). American had issued guarantees covering approximately $842 million of AMR’s unsecured debt (and interest thereon). AMR also guarantees $6.7 million of American’s leases of certain Super ATR aircraft, which are subleased to AMR Eagle.

American has entered into sale-leaseback arrangements with certain leasing companies to finance 31 Boeing 737-800 aircraft scheduled to be delivered from July 2012 through 2014. The financings of each aircraft under these arrangements are subject to certain terms and conditions.

During the first six months of 2012, American financed 14 Boeing 737-800 aircraft under sale-leaseback arrangements, which are accounted for as operating leases.

Certain of American’s debt financing agreements contain loan to value ratio covenants and require American to periodically appraise the collateral. Pursuant to such agreements, if the loan to value ratio exceeds a specified threshold, American is required to subject additional qualifying collateral (which in some cases may include cash collateral) or, in the alternative, to pay down such financing, in whole or in part, with premium (if any).

Specifically, American is required to meet certain collateral coverage tests on a periodic basis on three financing transactions: (1) 10.5% $450 million Senior Secured Notes due 2012 (the 10.5% Notes), (2) Senior Secured Notes, and (3) 2005 Spare Engine EETC due in 2012, as described below:



	10.5% Notes		Senior Secured Notes	2005 Spare Engine EETC
Frequency of Appraisals	Semi-Annual (April and October)		Semi-Annual (June and December, commencing December 2011)	Semi-Annual (April and October)
LTV Requirement	43%; failure to meet collateral test requires posting of additional collateral		1.5x Collateral valuation to amount of debt outstanding (67% LTV); failure to meet collateral test results in American paying 2% additional interest until the ratio is at least 1.5x; additional collateral can be posted to meet this requirement	31.6% applicable to the one Tranche only; failure to meet collateral test requires posting of additional cash collateral
LTV as of Last Measurement Date	47.5%		37.8%	31.6%
			Generally, certain route authorities, take-off and landing slots, and rights to airport facilities used by American to operate certain services between the U.S. and London Heathrow, Tokyo Narita/Haneda, and China
Collateral Description	143 aircraft consisting of:			87 spare aircraft engines consisting of:
	Type	# of Aircraft		Engine/Associated Aircraft	# of Engines

	MD-80	74		JT8D-219/MD-80	47
	B757-200	41		RB211-535E4B/B757-200	22
	B767-200ER	3		CF6-80A/B767-200ER	3
	B767-300ER	25		CF6-80C2 B6/B767-300ER	12
	TOTAL	143		CF6-80C2 A5/A300	3
				TOTAL	87

At June 30, 2012, the Company was in compliance with the most recently completed collateral coverage tests for the Senior Secured Notes and the 2005 Spare Engine EETC. As of June 30, 2012, American had $41 million of cash collateral posted with respect to the 10.5% notes but was not in compliance with the most recently completed collateral coverage test for that transaction. The Company has not remedied its non-compliance with that test due to the ongoing Chapter 11 Cases.

Almost all of the Company’s aircraft assets (including aircraft and aircraft-related assets eligible for the benefits of Section 1110 of the Bankruptcy Code) are encumbered, and the Company has a very limited quantity of assets which could be used as collateral in financing.

The Chapter 11 petitions triggered defaults on substantially all debt obligations of the Debtors. However, under Section 362 of the Bankruptcy Code, the commencement of a Chapter 11 case automatically stays most creditor actions against the Debtors’ estates.

The Debtors cannot predict the impact, if any, that the Chapter 11 Cases might have on these obligations. For further information regarding the Chapter 11 Cases, see Note 1 to the Condensed Consolidated Financial Statements.