Morgan Stanley to help finance US Air's Delta bid

[Gilding the Lily]

Doubt it. This is probably more about the mini-cratering of the LCC stock, which if it keeps going, will reduce the value of the deal significantly thus requiring more financing.

I think you are right. This is a typical tactic when the value of a deal is slightly devalued based upon the current trading price.

This is meant to signal to the creditors: Hey, the value of our airline is dropping slightly; but we will make it up by obtaining more favorable financing terms. US also has another financier lined up in case another similar situation occurs. US is flexing its “Wall Street muscles.â€￾ Although the decision is solely in the creditors’ hand at the time being, these tactics may alter slightly the opinion of the creditors. At least that is what Parker is hoping.

This also may allow US to offer more cash if they are able to file a plan after the DL exclusivity period has tolled. The money absorbed by obtaining better financing terms could be used as cash to woo the creditors, if it came to that.

 

[nostradamus]

Doubt it. This is probably more about the mini-cratering of the LCC stock, which if it keeps going, will reduce the value of the deal significantly thus requiring more financing.

Delta Air Lines Receives Interim Court Approval For $2.05 Billion In Post-Petition Financing

Company Also Receives Continued Interim Approval Of Key “First Day Motionsâ€￾ Enabling Continuation Of Normal Business Operations

ATLANTA, Sept. 16, 2005 – Delta Air Lines (NYSE: DAL) today announced that the U.S. Bankruptcy Court for the Southern District of New York has granted interim approval for the $2.05 billion in post-petition financing commitments the company has received to help support its business during its Chapter 11 reorganization. The court has also continued its interim approval of a series of “first day motionsâ€￾ that will facilitate Delta’s continued normal business operations.

On Friday, Judge Prudence C. Beatty granted Delta’s request for interim authorization to utilize up to $1.4 billion of the $1.7 billion in debtor-in-possession (DIP) financing committed to Delta by GE Commercial Finance and Morgan Stanley as Co-Lead Arrangers.

 

[Gilding the Lily]

Delta Air Lines Receives Interim Court Approval For $2.05 Billion In Post-Petition Financing

Company Also Receives Continued Interim Approval Of Key “First Day Motionsâ€￾ Enabling Continuation Of Normal Business Operations

ATLANTA, Sept. 16, 2005 – Delta Air Lines (NYSE: DAL) today announced that the U.S. Bankruptcy Court for the Southern District of New York has granted interim approval for the $2.05 billion in post-petition financing commitments the company has received to help support its business during its Chapter 11 reorganization. The court has also continued its interim approval of a series of “first day motionsâ€￾ that will facilitate Delta’s continued normal business operations.

On Friday, Judge Prudence C. Beatty granted Delta’s request for interim authorization to utilize up to $1.4 billion of the $1.7 billion in debtor-in-possession (DIP) financing committed to Delta by GE Commercial Finance and Morgan Stanley as Co-Lead Arrangers.

That is not all that significant. That was before the US offer was made public. Morgan Stanley would have made that DIP loan regardless of whether it thought DL should be a standalone airline or not, as DIP financing is given a priority in bankruptcy, regardless of the potential success of the airline. In other words, they would have been near the top of the list of people who are to be paid!

The financing for a DL/US deal is much more significant. Although the loan will likely be secured in some fashion (most likely with the assets of DL) it is unlikely that the financing would be entirely secured. This means that Morgan Stanley now has some faith that the return from a DL/US is worth the risk. This, in turn, may signal to the creditors that Wall Street is behind the US/DL deal and, as such, may influence the creditors' decisions.

 

[BoeingBoy]

This means that Morgan Stanley now has some faith that the return from a DL/US is worth the risk.

Interesting that both Citi and Morgan Stanley are "joint lead arrangers" of the financing rather than the financiers themselves. Makes one wonder just how much risk they're facing as opposed to the significant fees they'll collect if the deal proceeds.....

Jim

 

[PA18]

Your love gives me such a thrill....

but your love don't pay my bills, I want money!


That's what I want...

Barrett Strong, 1959

I know you don't care about the employees but if this airline is a mess now, "we aint seen nothing yet".

The Blues Magoos, 1967



Hey, just in case any of you happen to be a contestant on "Jeopardy", and the category is "Oldies But Goodies", I just thought I'd try to help out...

 

[Gilding the Lily]

Interesting that both Citi and Morgan Stanley are "joint lead arrangers" of the financing rather than the financiers themselves. Makes one wonder just how much risk they're facing as opposed to the significant fees they'll collect if the deal proceeds.....

Jim

Good point. I hope we are able to see the terms of any agreement in the near future. It would be interesting to see if either of the two firms is taking a lead role in the financing, and whether one firm is partially secured (favorable rate) and the other unsecured (less than favorable rate).

 

[BoeingBoy]

My guess is that they will just put together the group of lenders (banks, mutual funds, etc) and pocket the underwriting fee, which will probably be a few hundred million $'s. As we've discussed before, it's also my guess that at least a significant portion of the actual loans will be secured in one form or another.

Jim

 

[bigbusdrvr]

My guess is that they will just put together the group of lenders (banks, mutual funds, etc) and pocket the underwriting fee, which will probably be a few hundred million $'s. As we've discussed before, it's also my guess that at least a significant portion of the actual loans will be secured in one form or another.

Jim

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That could be the advantage doug vs advantage delta that Mr. Parker has in his pocket. With delta owning vs leasing a large portion of their fleet, he can use that equipment as collateral for the loans he needs topurchase delta.

Buy them with their own collateral, what a concept. So it looks like leasing is definately a safety net from a hostile takeover....