Carrier Now Worth More Than USAG Bid
Despite the seeming turmoil surrounding US Airways Group's
hostile takeover bid for Delta Air Lines, investors haven't wavered
in their support for the Atlanta-based carrier. In fact, thanks to
their dollars, bankrupt Delta is now worth more than the $8.4
billion merger offering.
Reuters reports Delta bonds traded at around 67 cents on the
dollar Friday, implying a valuation of $9.4 billion to $10.7
That could signal a couple of things, analysts say. Investors
either have faith in Delta's plan to emerge from bankruptcy in 2007
as an independent airline... or, they're anticipate USAG will
sweeten their initial offer.
With Delta scheduled to (finally) release its
reorganization plan this week, Standards & Poors analyst
Phillip Baggaley says investors are looking for signs the airline
has a clear path in mind to accomplish the former scenario. A
valuation higher that USAG's bid would make Delta's argument more
"It would be hard for Delta's management to make a case if they
can't suggest a higher valuation," Baggaley said.
The Wall Street Journal reports Delta plans to value the airline
at somewhere between $10 billion and $12 billion. The reorg plan
could be submitted to the US Bankruptcy Court as soon as
"Management has the burden of demonstrating that there is more
value in a stand-alone emergence than that of a US Air or competing
bid for Delta," said an unnamed Delta bond holder.
That may also open the door to yet another airline to make a bid
for Delta. Given Delta's reluctance to assist USAG in any way with
its bid, it's likely yet another offer would muddy the waters even
The final decision on any takeover bid rests on Delta's
creditors committee -- at least, until Delta emerges from Chapter
11. The committee hasn't made a formal comment on USAG's offer
since US Airways presented its plan to them on November 15.