The deal, which would create the world's largest airline, surpassing United Continental (UAL), may also benefit Citigroup (C) and the billions it holds in credit card receivables from the still-bankrupt American's AAdvantage card.
The connection hinges on Citibank Credit Card Issuance Trust (CCCIT), which holds about $54 billion in receivables, of which roughly $13 billion are tied to the American Airlines AAdvantage card.
Citigroup and the credit card trust have noted in recent Securities and Exchange Commission filings that the pending resolution of American Airlines bankruptcy process leaves material risks to the operations and financial condition of the AAdvantage card piece of the trust, which represents about 24% of its $53.8 billion in receivables outstanding.The merger with US Airways could eliminate much of the AAdvantage risk tied to the trust, according to ratings agency Moody's, potentially benefiting the credit quality of the CCCIT asset-backed security and its overall risk for Citigroup. "What earlier looked like a negative credit factor has become positive," writes Moody's analyst Gregory Gemson, in a Thursday note to clients. "
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