Delta revalued at 12B

[phasersonstun2]

Delta has valued their recovery plan at 9 to 12 Billion dollars, which is curious, since AMR is valued at around 9B and Southwest, arguably the juggernaut of the industry, is valued at 12.4B.

DELTA IS WORTH AS MUCH AS SOUTHWEST?

Hmmmmmm.

Ok, for the sake of argument let's say that it is. That means that DL must make the valuation public (unless it goes private... hey wait... MAYBE THATS WHAT THEYRE GONNA DO!)

If DL DOES go private, then they can say whatever they want. Their investors of course will have to be some truly inspired and very patient entities, not needing to touch about 12 billion dollars for around ten years.

Going long on an airline investment is like holding a bond, in fact, a junk bond. High risk. So will DL's creditors buy in to the 12B rhetoric or will they use standard accounting to come up with a realistic basis and place the airline at its' true non-merged value of around 2-4B, merged at 8-10B.

Leave your emotions at the door... watch the money.

 

[luvthe9]

Let’s look at how Delta’s self-estimated valuation compares to the rest of us:

Airline/Valuation (in billions)
Southwest - $12.4
Delta (self evaluation) - $9.4 to $12.0
American - $6.7
United - $5.0
US Airways - $4.9
Continental - $3.9
I think Grinstein is senile or telling a "little white lie"

 

[abe]

Going long on an airline investment is like holding a bond, in fact, a junk bond. High risk. So will DL's creditors buy in to the 12B rhetoric or will they use standard accounting to come up with a realistic basis and place the airline at its' true non-merged value of around 2-4B, merged at 8-10B.

I'm going to admit that my knowledge of this valuation stuff is lacking. So maybe you can shed some light.

Help me out here....are you saying that Delta is worth 2-4B by itself, but 8-10B merged with US Airways?

Explain that to me. Do you mean that Delta, combined with the "huge" enhancements that US Airways brings to the table (like the shuttle, CLT hub, a few European routes, a bunch of mis-matched narrow body aircraft, etc) is somehow worth 6 Billion more than the stand alone Delta? How 'bout the extra debt (23B)...how does that figure into the equation?

Since you seem pretty sure about all of this, here's another question for you. Is "Market Capitalization" the same as "Consolidated Enterprise Value"?

Finally, if Delta is only worth 2-4B, why is Parker offering over 8B? And assuming that he low-balled his first offer (you never put your best offer on the table right away in any negotiation), could it be that Parker himself actually views Delta as being worth about what Blackstone thinks Delta is worth (9-12B)?

Please enlighten us all. I for one am looking forward to your response...or someone else who know's the answers. Because I'll admit, really don't know.

Abe

 

[USA320Pilot]

Abe:

I'm no valuation expert either, but I bet Delta's valuation is somewhere around United's. For the sake of argument, let's say Delta does a superior job in its "formal reorganization" and would have an standalone valuation 50% higher than United. This would place Delta and at the top of the legacy carrier valuations, which would be a stunning turnaround for the bankrupt company.

That would give Delta a $7.5 billion valuation, which again would be highest valuation of any legacy carrier and be about $1 billion short of US Airways' offer.

All emotion aside, the creditors and their advisors fully understand this and will act accordingly, regardless of what Delta's excellent group of employees desire.

Regards,

USA320Pilot

 

[FWAAA]

The $9.4 to $12 billion value attached to DL's POR has nothing to do with the market cap of the reorganized Delta.

The range is Delta's estimate of the value of the consideration given to the creditors in order to be allowed to emerge from Ch 11 as a standalone entity and get a discharge from its unpaid debts.

US has proposed giving the creditors cash and stock worth more than $8 billion - now DL comes along and says its offer will be more like $9.4 billion to $12 billion. Neither has anything to do with market capitalization.

 

[abe]

FWAAA and USAPilot,

OK, so the "Market Cap" of the various airlines mentioned above have nothing to do with the valuation of Delta (9-12 Billion)...is that correct? By your posts, you seem to be in disagreement on this??


For USAPilot: And as far as UAL and Delta post BK, you're comparing apples to oranges. Despite what you might think, Delta has done way more in BK than UAL leaders ever dreamed of doing. And they've done it in half the time.

Besides slashing and burning employees (which they both did), Delta has accomplished huge revenue gains (in comparison with the rest of the industry), engineered unprecedented route changes, and simplified their fleet. There are many more changes...I could go on and on.

The big one that I see is that Delta will emerge with 7.6 Bilion in debt....less than half of what UAL had when they exited BK.


Abe

 

[wings396]

As the saying goes, figures lie and so do those who calculate them. The 12B figure has been calculated by DL for DL. They can run the numbers as high as they wish to make things look good on paper. I have gone thru the numbers game played by airline management a few times already. It is amazing what they can do to come up with a loss when profit sharing is on the line. :down:

 

[abe]

As the saying goes, figures lie and so do those who calculate them. The 12B figure has been calculated by DL for DL. They can run the numbers as high as they wish to make things look good on paper. I have gone thru the numbers game played by airline management a few times already. It is amazing what they can do to come up with a loss when profit sharing is on the line. :down:

I don't think that's correct.

My understanding is that The Blackstone Group, after having full access to Delta's "books", has calculated a valuation range of 9.4B to 12B.

And Parker, without seeing "the books" has calculated 8.4B, or so (his offer price).

If I'm understanding this correctly, they are not far off.

(And if you assume that Parker didn't throw his best offer on the table at the beginning of this "negotiation", he probably actually values Delta at a level close to what Blackstone/Jerry came up with.)


Abe

 

[brokenwrench]

DL retained the Blackstone Group for there official numbers. However DL managment and the BOD cross checked these numbers with two other private equity and management groups to ensure that this number was accurate.

One of them was the same company used by Mr. Parker during the HP/US merger.

I am sure since USA320pilot is so versed in this process he will be able to provide the names of these companies.

 

[hp_fa]

I am sure since USA320pilot is so versed in this process he will be able to provide the names of these companies.

He is a well-qualified name-dropper.

 

[Dave]

You need to look at 'enterprise value' not market cap....I copied the following explanation of enterprise value.

BTW, this is what yahoo financials lists as the current 'EV' for various airlines: AMR=15.73 billion, UAUA=12.3 billion, LUV=12.11 billion, CAL=6.92 billion, LCC=5.76 billion, JBLU=4.53 billion dollars.


A measure of a company's value, often used as an alternative to straightforward market capitalization. EV is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

Think of enterprise value as the theoretical takeover price. In the event of a buyout, an acquirer would have to take on the company's debt, but would pocket its cash. EV differs significantly from simple market capitalization in several ways, and many consider it to be a more accurate representation of a firm's value. The value of a firm's debt, for example, would need to be paid by the buyer when taking over a company, and thus EV provides a much more accurate takeover valuation because it includes debt in its value calculation.

 

[phasersonstun2]

[quote name='FWAAA' date='Dec 20 2006, 05:31 PM' post='439891'

The range is Delta's estimate of the value of the consideration given to the creditors in order to be allowed to emerge from Ch 11 as a standalone entity and get a discharge from its unpaid debts.

[/quote]

In other words, DL will have to convince the creditors to release most if not all of their claims against the bankrupt Delta and accept shares in the new Delta stock. Quite possible but this would be a massive leap of faith, dwarfing the debt release by U and UAL combined.

 

[abe]

In other words, DL will have to convince the creditors to release most if not all of their claims against the bankrupt Delta and accept shares in the new Delta stock. Quite possible but this would be a massive leap of faith, dwarfing the debt release by U and UAL combined.

phaser,

How about throwing some facts our way to prove your point:

Delta's plan "dwarfs the debt release by U and UAL combined??"

Please posts some specifics...a lot of us are interested, but don't know the details of the U and UAL plans.

Abe