Indebtedness

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



	September 30, 2012		December 31, 2011
Secured variable and fixed rate indebtedness due through 2023 (effective rates from 1.00%—13.00% at September 30, 2012)	$	2,648	$	2,952
Enhanced equipment trust certificates due through 2021 (rates from 5.10%—10.375% at September 30, 2012)	1,830		1,942
6.00%—8.50% special facility revenue bonds due through 2036	1,318		1,436
7.50% senior secured notes due 2016	1,000		1,000
AAdvantage Miles advance purchase (net of discount of $56 million) (effective rate 8.3%)	809		890
6.25% senior convertible notes due 2014	—		—
9.0%—10.20% debentures due through 2021	—		—
7.88%—10.55% notes due through 2039	—		—
	7,605		8,220
Less current maturities	1,508		1,518
Long-term debt, less current maturities	$	6,097	$	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 September 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	$	753	$	166	$	919
2013	882		192		1,074
2014	744		765		1,509
2015	645		161		806
2016	1,637		226		1,863

Principal Subject to Compromise includes payments not made due to the Chapter 11 Proceedings of $157.4 million.

Future minimum lease payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of a year as of September 30, 2012, were: remainder of 2012 – $262 million, 2013 – $944 million, 2014 – $881 million, 2015 – $812 million, 2016 – $733 million, and 2017 and beyond – $4.7 billion.

As of September 30, 2012, AMR had issued guarantees covering approximately $1.5 billion of American’s tax-exempt bond debt (and interest thereon) and $4.7 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 $3.7 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 35 Boeing 737-800 aircraft scheduled to be delivered from October 2012 through 2014. The financings of each aircraft under these arrangements are subject to certain terms and conditions. These financing commitments are subject to various terms and conditions. In addition, in some instances, they are also subject to collaboration with the Creditors' Committee and other key stakeholders and to the approval of the Bankruptcy Court.

During the first nine months of 2012, American financed 21 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, as applicable, to subject additional qualifying collateral (which in some cases may include cash collateral), or pay down such financing, in whole or in part, with premium (if any), or pay additional interest on the related indebtedness, as described below.

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



	10.5% Notes		Senior Secured Notes
Frequency of Appraisals	Semi-Annual (April and October)		Semi-Annual (June and December, commencing December 2011)
LTV Requirement	43%; failure to meet collateral test requires American to post additional collateral or pay down indebtedness		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
LTV as of Last Measurement Date	47.5%		37.8%
			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:
	Type	# of Aircraft

	MD-80	74
	B757-200	41
	B767-200ER	3
	B767-300ER	25
	TOTAL	143

At September 30, 2012, the Company was in compliance with the most recently completed collateral coverage tests for the Senior Secured Notes. As of September 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. On October 1, 2012, the indebtedness underlying the 2005 Spare Engine EETC with respect to which American was required to comply with the collateral coverage test was paid in full, so American is no longer required to comply with a collateral coverage test for that transaction.

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.