AMR taps $225 million credit line

[rainbow4321]

Not sure exactly what this means but it doesn't look good..looked like a weekend news dump. Maybe some of you DU financial gurus can translate it into laymans English for the rest of us:

http://www.star-telegram.com/business/story/937018.html

AMR Corp., parent of American Airlines, will tap a $225 million credit line to reduce the amount of money that could be held back for credit-card reserves.

The Fort Worth-based airline said in a filing with the Securities and Exchange Commission on Friday that one of its credit-card processing agreements requires a reserve based on the amount of unrestricted cash the company has on hand, among other things.

<snip>

A sudden increase in credit-card reserves — the money temporarily held back by credit processors on ticket sales — could slow the amount of cash flowing to the airline, making it harder to meet obligations such as debt payments and other costs.

That scenario helped push Frontier Airlines into bankruptcy earlier this year. AMR executives said in July that credit-card processors could potentially hold back a portion of purchases. Airline spokesman Andy Backover noted that the presence of the credit line wasn’t enough to satisfy requirements

[kirby]

1. My read...

I obviously have no specific info, but it sounds like the company that processes credit cards for AA is very concerned that AA is going to file bankruptcy. If AA does so, the credit card processor doesnt want to be left/stuck with losing money from people disputing credit card charges (chargebacks) for tickets that become worthless.

It might also be a chicken before the egg type of problem too, because Frontier claims they filed bankruptcy as a result of the credit card processor making these 'onerous demands' on them.

[rainbow4321]

2. You just have to wonder

what companies like this know what we don't know (yet).
Thanks for info..reading it had me thinking like the news was purposely given a small blurb on the weekend so as not to gain alot of attention.