Claims Creditors Could See As Much As 80 Cents On Dollar
"Delta today is moving
forward with a plan designed to provide significant value to our
creditors as well as customers, employees and other key
stakeholders on a timely basis." With that statement by CEO Gerald
Grinstein on Tuesday, Delta Air Lines revealed its plan to
reorganize the carrier, and return it to profitability in 2007.
TheStreet.com reports the five-year business plan continues
Delta's longstanding position its greatest chance for success would
be as a separate airline, refuting claims by US Airways Group that
a merger of the two carriers is needed to return Delta to its past
Most notably, Delta's reorganization plan sets the airlines's
equity value at $9.4 billion to $12 billion -- confirming reports that surfaced
Monday. Even at the low end, that is still one
billion higher than USAG's $8.4 billion hostile takeover bid.
Delta also claims that under its plan, unsecured creditors could
recover anywhere from 63 percent to 80 percent of their claims.
That's a significant selling point to Delta's creditors, who will
ultimately decide the fate of USAG's merger offer.
"By contrast, the US Airways proposal provides inferior value to
our standalone plan, is structurally flawed, and raises
overwhelming regulatory and labor issues that -- after a lengthy
delay -- are likely to prevent the proposed merger from being
completed," Grinstein added.
Delta projects net income for 2007 at $500 million, after profit
sharing... a figure the airline says will rise to roughly $1.2
billion in 2010. The airline also says its long-term debt will drop
from $17 billion in 2005, to approximately $7.5 billion in
The plan now goes to the US Bankruptcy Court for its approval.
Delta has until April 16, 2007 to garner approval from its
creditors, before they can submit competing reorg plans.