Delta rejects US Airways bid, files own plan

[700UW]

NEW YORK, Dec 19 (Reuters) - Delta Air Lines Inc. (DALRQ.PK: Quote, Profile , Research) said on Tuesday its board rejected an $8.4 billion bid from US Airways Group Inc. (LCC.N: Quote, Profile , Research) and filed its own plan to emerge from bankruptcy as an independent airline.

Delta has repeatedly said that it intends to emerge from Chapter 11 protection as a stand-alone carrier, but this is the first time the Atlanta-based airline has rejected outright the US Airways bid, which was made last month.

Delta, the No. 3 U.S. carrier, said its five-year business plan filed with a U.S. bankruptcy court values the company at about $9.4 billion to $12 billion, and would result in a recovery for Delta's unsecured creditors of about 63 percent to 80 percent of their allowed claims.

Atlanta-based Delta said its board had concluded that its plan would provide the company's creditors with better value, greater certainty and a much faster timetable than the US Airways proposal.

"We will emerge as a thoroughly new Delta that will be a strong global carrier with a solid foundation for profitable growth in a highly competitive environment," Chief Executive Gerald Grinstein said in a statement.

The airline, which has been operating under bankruptcy protection since September 2005, said it intends to emerge from Chapter 11 in the spring of 2007.

The business plan projects a return to profitability in 2007 and an increase in net income, after profit sharing, from about $500 million in 2007 to some $1.2 billion in 2010.

The airline also expects to cut its net long-term debt by more than half to about $7.5 billion in 2007 from about $17 billion in 2005.

 

[PHL]

So what's the next step? Do the creditors now decide whether to go with US' offer or have faith in the DL Reorg plan?

 

[luv2fly]

So what's the next step? Do the creditors now decide whether to go with US' offer or have faith in the DL Reorg plan?

Since DL has the exclusive right to reorganization, the DL plan will now be presented to the BK in full. If the judge and creditors committee approve the plan there will be no merge.
Of course there is the possibility the creditors may elect to decline DL's proposal. I believe the exclusive right to reorg expires mid February.

 

[robbedagain]

part of the news release said that DELTA said in its plan that US is having difficult with its current merger with US i read that on AOL Business i dont have a a link sorry

 

[longing4piedmont]

part of the news release said that DELTA said in its plan that US is having difficult with its current merger with US i read that on AOL Business i dont have a a link sorry

Delta Files Plan of Reorganization

http://news.delta.com/article_display.cfm?article_id=10489


Delta Says US Airways Proposal Inferior in Value

http://news.delta.com/article_display.cfm?article_id=10487


note to Tempe: DL website actually works.....

 

[US1YFARE]

note to Tempe: DL website actually works.....

So does AirTran's!!!!!

 

[Harry Callahan]

part of the news release said that DELTA said in its plan that US is having difficult with its current merger with US i read that on AOL Business i dont have a a link sorry

Bingo we have a winner.

 

[USA320Pilot]

Delta Air Lines filed its POR and Disclosure Statement with the bankruptcy court today and aggressively attacked US Airways’ merger proposal.

Delta valued the company following its emergence from bankruptcy at about $9.4 billion to $12 billion.

In a research report, Lehman Brothers Airline analyst Gary Chase said, “Valuation predicated on a $15bn claims pool (smaller than US Airways estimates) and a 5.5x - 6.25x EV/EBITDAR multiple of 2007 EBITDAR. Group not out of line with that now, but that circumstance has arisen only following the merger announcement. Absent consolidation potential (which Delta's plan argues against), we would see 5.0x-5.5x as a more reasonable valuation ($1.5bn to $3bn less than Delta’s claim)."

Thus, if Lehman Brothers estimate is accurate than Delta has grossly over exaggerated the value of the airline.

If we assume Lehman Brothers valuation is correct than Delta could be valued at significantly lower than management’s claim, possibly as low as $6.4 billion. For discussion purposes, if we take the mean of Lehman Brothers claim or a valuation $2.25 billion less than Delta management’s position than the Atlanta-based airline could be worth $7.175 to $9.75 billion, which could be less than US Airways initial bid.

Yesterday the AP reported “US Airways is willing to increase its $8.4 billion bid for Delta Air Lines Inc. if Delta can justify that it is worth more, an official with knowledge of US Airways' plans told The Associated Press on Monday. The official, who spoke on condition of anonymity because of the sensitivity of the talks, said US Airways first needs to see how much Atlanta-based Delta values itself at in its reorganization plan, which it could file with the bankruptcy court as early as Tuesday, and whether any other airline makes a bid for Delta,†the news agency said.

See Story

Shortly following Delta’s filing Reuters reported US Airways it will remain a "dedicated bidder" for Delta Air Lines Delta's rejection of the bid. An airline spokeswoman said the carrier believes its proposal to merge with Delta offers the best value for its stakeholders.

See Story

According to Chase, “We fully expect a comprehensive US Airways response, but not for several days. We believe US Airways can raise its bid, but we do not expect the company to overpay for Delta.â€

In my opinion, the fight for Delta Air Lines has just begun and the threat to Delta’s stand-alone plan remains very real and compelling. If not Gerry Grinstein would not be veraciously attacking US Airways’ plan with such energy.

Regards,

USA320Pilot

 

[ClueByFour]

http://news.yahoo.com/s/ap/20061219/ap_on_...elta_bankruptcy

Delta Air Lines Inc. filed a reorganization plan Tuesday that calls for it to emerge from Chapter 11 bankruptcy protection next spring as a standalone company. It also said that its board has formally rejected US Airways' $8.4 billion hostile takeover bid to create the nation's largest airline.

Delta also said Tuesday that its board has unanimously rejected US Airways' unsolicited offer, disclosed Nov. 15.

"The board concluded that Delta's standalone plan will provide the company's creditors with superior value and greater certainty on a much faster timetable than the US Airways proposal," Delta said in a statement.

In a conference call with analysts, Delta's chief executive officer, Gerald Grinstein, put it bluntly: "US Airways is the worst of all potential merger partners."

Bastian said Delta showed its reorganization plan to its creditors committee last week. He would not say how creditors specifically reacted, but he said he believes the committee will ultimately support Delta's plan.

Delta said US Airways continues to experience significant integration problems with its prior, smaller deal with America West. It believes US Airways is not equipped to simultaneously integrate a substantially larger company like Delta.

US Airways' shares fell $1.02, or 1.8 percent, to $54.79 in morning trading on the New York Stock Exchange.

 

[BoeingBoy]

There was a DL conference call @ 8:30am this morning. The replay is available here.

There is another DL conference call scheduled for 2:00pm that will be available here.

Jim

 

[ClueByFour]

It's worth noting that Lehman Brothers has a self serving interest in seeing a merger go forth, thus anything that their analysts might produce is by it's very nature, suspect.

 

[N924PS]

It's worth noting that Lehman Brothers has a self serving interest in seeing a merger go forth, thus anything that their analysts might produce is by it's very nature, suspect.

Just like the Delta stand alone plan: suspect.

 

[wings396]

The ball has always been in the creditors hands, and the DL boards decision means nothing to them. It would have been nice to have the board go along with the plan, but now the BK court and the creditors will have to decide. I don't think that anybody really ever expected the DL board to go along with the US offer since it would have been the end of the road for most if not all of the members. Only time will tell what the final outcome will be. This big newsflash comes as no suprise to anyone....

 

[luv2fly]

Just like the Delta stand alone plan: suspect.

Suspect as any plan is. DL's plan doesn't rely on speculated DOJ approval. DL's plan won't extend DL's time in BK. DL's plan doesn't involve serious unresolved labor issues.
I think it is safe to say US's wish list faces monumental hurdles and qualifies as more suspect.

 

[aquagreen73s]

Suspect as any plan is. DL's plan doesn't rely on speculated DOJ approval. DL's plan won't extend DL's time in BK. DL's plan doesn't involve serious unresolved labor issues.
I think it is safe to say US's wish list faces monumental hurdles and qualifies as more suspect.

All true, but with US Airways DAL still has a chance. Alone, it's curtains. We've seen this exact scenario before from Crystal City, VA. If Gerry somehow gets his POR pushed through and DAL emerges independant, then that's just the end of the first chapter. Chapter 2 will be DAL's continued struggles and excessive losses. Chapter 3 will be about DAL's undercaptialization and deteriorating, post BK financial condition. Chapter 4 will be desperation moves by the DAL BOD which will then be facing an imminent revisit to the steps of the Southern District of NY Bankruptcy Court. Look for sell offs, more pay concessions, and more stiffing of whatever creditors are left at that point. Chapter 5 will be the final chapter...if DAL is lucky then there will be a last minute DIP financing by Airways as DAL goes into a second, and this time accelerated Chapter 11 with a liquidation right around the corner. The other scenario is complete fragmentation ala Pan Am.

Gerry should take a lesson from Dave Siegel. This "We can make it alone" script has already been played by the old US Air and it was a long shot, if not just plain foolish. If Gerry really had the best interests of DAL and it's employees, he would run to Doug's offer and he'd do whatever it took to explain to the employees that things are pretty bad and although stand-alone status would be the ideal, reality makes the ideal a distant illusion.

In the end it won't matter to US Airways. DAL will wind up broken, fragmented, and the once great name will slip beneath the waves much like Pan Am - gone forever but not forgotten. Then, US Airways and the others will move in to grab the pieces. Gerry will be back in Seattle, sitting pretty on his ranch and content that he did the best he could. But Gerry's contentment will not be shared by the number of former DAL employees who are now faced with survival without the Widget. Good luck.