Delta Gets Larger Loans At Lower Rates

[WorldTraveler]

Delta Air Lines Receives Final Court Approval for $2.2 Billion in Post-Petition Financing
Thursday October 6, 5:21 pm ET
Debtor-In-Possession Credit Facility Increased By $200 Million


ATLANTA, Oct. 6, 2005 (PRIMEZONE) -- Delta Air Lines (NYSEAL - News) today announced that the U.S. Bankruptcy Court for the Southern District of New York has granted final approval for the $2.2 billion in post-petition financing the company has arranged to help support its business during its Chapter 11 reorganization.
On Thursday, Judge Prudence C. Beatty granted final authority for Delta to utilize $1.9 billion in debtor-in-possession (DIP) financing provided to Delta by GE Commercial Finance and Morgan Stanley as co-lead arrangers. Pursuant to the court's interim approval in the first day orders on Sept. 16, 2005, Delta had already borrowed $1.4 billion under this facility. The total size of this credit facility was increased to $1.9 billion from $1.7 billion, and the interest rate on two of the term loans under this facility was reduced due to strong demand from participants in the loan syndicate.

The Court has also given final approval for Delta's secured post-petition financing provided by American Express. Delta borrowed the full $350 million of this facility pursuant to the Court's interim approval on Sept. 16, 2005. In connection with the borrowing of the balance of the $1.9 billion DIP facility, Delta will apply $50 million of the proceeds to pay down an equal amount of the American Express facility. As a result, Delta will have $2.2 billion of post-petition financing, an increase of approximately $1.22 billion from the pre-petition secured credit facilities.

``We are very pleased with the successful outcome of our efforts to obtain this level of post-petition financing,'' said Edward Bastian, Delta's chief financial officer. ``Because of strong demand from financial institutions that wanted to participate in the DIP loan being arranged by GE Commercial Finance and Morgan Stanley, we were able to increase the size of that loan by $200 million and also reduce the interest rate we will pay on a substantial portion of this loan. We believe that our ability to achieve these significant improvements to the DIP credit facility and to secure the continued participation of American Express in the loan package indicates the confidence that investors have in our business plan and our ability to execute that plan. The financial demands on our company continue to be unrelenting -- including unprecedented and unpredictable fuel prices. We believe our new financing arrangements will be sufficient to support our business during the reorganization, but it will require a continued commitment across our organization to reducing costs and growing revenues.''

At the hearing Thursday, Delta also received court authorization to assume the Delta Connection agreements between Delta and Atlantic Southeast Airlines (ASA) and SkyWest Airlines, which were entered into in September 2005 in connection with Delta's sale of ASA to SkyWest Inc. Upon entry of a final order approving the assumption of the Delta Connection agreements, Delta will be entitled to receive an additional $125 million from SkyWest, representing $95 million of the deferred purchase price and $30 million relating to certain aircraft financing deposits. Delta completed the sale of ASA to SkyWest on Sept. 7, 2005, at which time Delta received $350 million, consisting of $330 million of the purchase price and $20 million related to aircraft deposits. Under the Delta Connection agreements, ASA and SkyWest will continue to serve as Delta Connection regional carriers through 2020.

Delta and its subsidiaries filed to reorganize under Chapter 11 on Sept. 14, 2005, in the U.S. Bankruptcy Court for the Southern District of New York. The case number is 05-17923-PCB. More information about Delta's Chapter 11 reorganization is available on the Internet at delta.com/restructure. Information about the post-petition financing, as well as other court filings and legal information, is available online at deltadocket.com.

Delta Air Lines is the world's second-largest airline in terms of passengers carried and the leading U.S. carrier across the

 

[Fly]

How low will employee morale go before Delta is done with cuts? Considering that they already cut f/a pay below United's AFTER their 2 paycuts, imagine how angry people may get if they try it again. Sad.


Aviation has certainly changed for the worse. At least we will always remember the hay days!!

 

[DontEverLieToAnyone]

How low will employee morale go before Delta is done with cuts? Considering that they already cut f/a pay below United's AFTER their 2 paycuts, imagine how angry people may get if they try it again. Sad.
Aviation has certainly changed for the worse. At least we will always remember the hay days!!

[post="309630"][/post]​

If the only thing that differentiates one airline from another is the quality of customer service (with fares being as competitive as they are now), wouldn't it be prudent to retain your MOST skilled/experienced personnel???! What kind of message are you putting out there regarding your "commitment" to providing good customer service if you layoff thousands of your best employees and replace them w/ the lowest bidding contractor???!!! It seems to me the only way to ensure survivability and retain market share is by CONSISTENTLY doing a better job than the other guys!!! How can anyone in their right mind expect to stay in this business of servicing the traveling public if you are more concerned with headcount and related costs than you are with satisfying customers???!!! :down:

 

[Fly]

They are paying 11.198%.

 

[WorldTraveler]

Fly,

I'm gone for one weekend and you come out of the woodwork spouting your lies and barely half-truths.

please post us the interest rate UA was paying for their DIP financing - you know the one that has been oustanding for 3 YEARS.

And, as we have previously established, DL's international flight attendants will make less than UA's for comparable seniority BUT domestic flight attendants will make more than UA's. Given that DL is and will come to be predominantly domestic, most DL flight attendants will in fact earn more than UA flight attendants - and that is before you have to pay your $35 a month in union dues (which of course, DL employees don't pay except for the pilots who are taking equally large pay cuts. Oh, the DL employees still have their QUALIFIED pension plans and the associated benefits - even the pilots.

 

[Deleted by Moderator]

That figure looks accurate according to this quote.

"Delta attorney Marshall Huebner said positive reception for the loan among a group of lenders led by GE Capital and Morgan Stanley allowed the company to obtain an additional $200 million on top of the $1.7 billion initially sought and borrow it at a rate of 11.198 percent, about 30 basis points below the original rate."

 

[Deleted by Moderator]

How I'm reading this, it looks like the pensions are about to be put on the chopping block.

The judge postponed until Oct. 17 a ruling on whether Delta should be forced to make contributions to its pilots' pension plans, as pilots union the Air Line Pilots Association and the Pension Benefit Guaranty Corp. have argued.

The airline is arguing that it should not have to make a $158 million payment to the pilots' main pension plan due Oct. 15 and should be allowed to freeze $84 million a year in supplemental payments to retired pilots.

Read here

 

[WorldTraveler]

moderator,
that hearing only regards the supplemental NON-qualified pensions which cover some pilots and some former execs. they are non-qualified because they are above the size that can be insured by the PBGC, or at least that is the effect. The hearing doesn't cover pensions covering the base retirement for pilots or the total retirement for all other employees.

A decision on the PBGC-insured pensions would probably not come for months until it becomes apparent how the rest of the restructuring works. Assuming pension liabilities is a balance sheet item since DL has said it will not make current pension payments while in BK. At the same time they are freezing their plans so effectively they aren't accumulating any more liabiities but they also aren't making any payments. The plans are being put on the back burner until a decision is made.

Delphi automotive's Chapter 11 filing puts pressure on Congress to enact meaningful pension reform not only for the airlines but for other businesses. As I've predicted, the automotive industry is next in line to start dumping pensions if the problem is not fixed and the automotive industry pensions are enormous in comparison w/ the airlnies. Telling companies that the only way they can lessen their pension obligations is to terminate them is not viable. Nor is it viable to tell them to pay more and more money to increase their funding levels. Freezing pensions and then giving companies 15-20 years to make up the deficit is the only way to allow companies to keep their pensions. At the same time, there have to be significantly penalties put in place for dumping pensions, including moving the PBGC much higher in the priority list in a bankruptcy. If companies dump their pensions on the PBGC, they will get a much bigger piece of the company or its assets if it is liquidated.