General Lee
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- Aug 24, 2002
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Delta Says Deal Is an Option, Just Not Now
By COREY DADE
January 30, 2007; Page A3
Delta Air Lines Inc. has assured creditors that it won't
rule out the possibility of merging with another airline
after exiting from bankruptcy if it defeats a hostile
takeover offer from US Airways Group Inc., according to
people familiar with the situation.
To build support for its plan to remain independent, Delta
appears close to agreeing with its official creditors
committee on several provisions designed to clear a path
toward an eventual tie-up. The parties are moving toward an
accord to exclude from Delta's new corporate charter and
bylaws any so-called poison pill that could pose an
insurmountable hurdle to future mergers, according to one
person familiar with the discussions.
In addition, the committee would have a strong hand in
selecting Delta's post-bankruptcy board, according to
knowledgeable people. The creditors committee wants a board
that favors consolidation as a strategic option, people
close to the board have said.
Delta, based in Atlanta, had been reluctant to grant some of
the concessions, but in recent weeks the committee made it
clear that it required them as a condition for approving
Delta's standalone plan over the US Airways merger.
Delta's apparent willingness to consider a future deal could
breathe life back into widespread hopes for an industry
consolidation wave, which airline observers thought could be
dashed if the US Airways-Delta merger failed. Airlines are
looking for partners in an effort to reduce the number of
seats in the air, lower operating costs and gain greater
pricing power.
Delta's efforts to appease the nine-member creditors
committee come as the group considers a sweetened takeover
offer from US Airways that emerged over the weekend. The
Tempe, Ariz., carrier has expressed a willingness to
increase its bid to $10.9 billion from $9.9 billion under
certain conditions. Yesterday, committee members discussed
the higher offer but reached no decision, say the people
familiar with the matter.
Still, the prospect of receiving an extra $1 billion in
cash, boosting the total cash payout to $6 billion, has
drawn interest from some committee members, according to
people familiar with the situation. The US Airways proposal
expires Thursday.
Delta's overall restructuring plan needs approval by
creditors holding two-thirds of claims, by value. An
increased offer from US Airways has the backing of an ad hoc
committee of creditors, which is working to gather other
creditors to its side. The ad hoc committee, consisting of
hedge funds and private investors, hold about 15% of all
claims worth roughly $2.3 billion. So far, say people close
to the group, they have lined up support from creditors
holding $4 billion in claims -- approaching the one-third
portion required to block the Delta plan, if need be.
Word of a sweetened deal has renewed investors' confidence
and boosted US Airways stock. In 4 p.m. composite trading,
US Airways' shares were up $2.30, or 4.4%, to $54.43 on the
New York Stock Exchange. However, the extra $1 billion in
cash alone might not be enough to sway the official
creditors committee. The termination fee, which a person
familiar with the situation says exceeds $500 million, falls
below the $1 billion range that some creditors committee
members want as compensation if the deal fails to gain
antitrust approval
Bye Bye--General Lee
By COREY DADE
January 30, 2007; Page A3
Delta Air Lines Inc. has assured creditors that it won't
rule out the possibility of merging with another airline
after exiting from bankruptcy if it defeats a hostile
takeover offer from US Airways Group Inc., according to
people familiar with the situation.
To build support for its plan to remain independent, Delta
appears close to agreeing with its official creditors
committee on several provisions designed to clear a path
toward an eventual tie-up. The parties are moving toward an
accord to exclude from Delta's new corporate charter and
bylaws any so-called poison pill that could pose an
insurmountable hurdle to future mergers, according to one
person familiar with the discussions.
In addition, the committee would have a strong hand in
selecting Delta's post-bankruptcy board, according to
knowledgeable people. The creditors committee wants a board
that favors consolidation as a strategic option, people
close to the board have said.
Delta, based in Atlanta, had been reluctant to grant some of
the concessions, but in recent weeks the committee made it
clear that it required them as a condition for approving
Delta's standalone plan over the US Airways merger.
Delta's apparent willingness to consider a future deal could
breathe life back into widespread hopes for an industry
consolidation wave, which airline observers thought could be
dashed if the US Airways-Delta merger failed. Airlines are
looking for partners in an effort to reduce the number of
seats in the air, lower operating costs and gain greater
pricing power.
Delta's efforts to appease the nine-member creditors
committee come as the group considers a sweetened takeover
offer from US Airways that emerged over the weekend. The
Tempe, Ariz., carrier has expressed a willingness to
increase its bid to $10.9 billion from $9.9 billion under
certain conditions. Yesterday, committee members discussed
the higher offer but reached no decision, say the people
familiar with the matter.
Still, the prospect of receiving an extra $1 billion in
cash, boosting the total cash payout to $6 billion, has
drawn interest from some committee members, according to
people familiar with the situation. The US Airways proposal
expires Thursday.
Delta's overall restructuring plan needs approval by
creditors holding two-thirds of claims, by value. An
increased offer from US Airways has the backing of an ad hoc
committee of creditors, which is working to gather other
creditors to its side. The ad hoc committee, consisting of
hedge funds and private investors, hold about 15% of all
claims worth roughly $2.3 billion. So far, say people close
to the group, they have lined up support from creditors
holding $4 billion in claims -- approaching the one-third
portion required to block the Delta plan, if need be.
Word of a sweetened deal has renewed investors' confidence
and boosted US Airways stock. In 4 p.m. composite trading,
US Airways' shares were up $2.30, or 4.4%, to $54.43 on the
New York Stock Exchange. However, the extra $1 billion in
cash alone might not be enough to sway the official
creditors committee. The termination fee, which a person
familiar with the situation says exceeds $500 million, falls
below the $1 billion range that some creditors committee
members want as compensation if the deal fails to gain
antitrust approval
Bye Bye--General Lee
