Will American Airlines CEO Pocket $20 Million Severance Payment? BAPCA § 503(c) Restrictions on Insider Severance Have No Teeth in Plan Confirmation

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This article examines the April 2013 American Airlines decision denying $20 million CEO severance payment under § 503(c) but seemingly adopting the exception set forth in In re Journal Register Co. allowing for the insider severance payment to be approved as part of a plan of reorganization if “reasonable” under § 1129(a)(4). Four days after the decision, American Airlines filed its plan of reorganization, conditioned on approval of the CEO severance payment, setting up a showdown on the “reasonableness” of the $20 million payment at confirmation.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Timothy Durken, Jager Smith P.C. | Attorney Advertising

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