Convertible Offer Pressures AMR

Shares of AMR (AMR Quote) dropped 3.8% Tuesday after investors took flight at the prospect of a big, dilutive convertible note offering.

AMR, parent of American Airlines, the world's largest airline, said it would sell $300 million worth of 20-year notes that are convertible into AMR shares. The notes will pay 4.5% annual interest. The details of the offering imply a conversion rate of $22.05 a share, which represents a 40% premium over Monday's closing price.

The news was bullish in that it showed AMR has regained relatively low-cost access to the capital markets, something it lacked not long ago. AMR said it would use the cash to fund general corporate purposes. ...