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 billion.

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 convincing.

"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 Tuesday.

"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 more.

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.

FMI: www.delta.com