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Delta Creditors Weighing Options

By HARRY R. WEBER
The Associated Press
Thursday, December 21, 2006; 1:05 AM

ATLANTA -- The unsecured creditors committee in Delta Air Lines' bankruptcy case is hedging its bet. A key player in deciding the carrier's fate, the committee said it supports Delta's decision to file its stand-alone reorganization plan, but that it also will weigh alternatives.

Until Wednesday, the committee had been largely silent since US Airways' unsolicited $8.4 billion bid for Delta was disclosed on Nov. 15.

"A number of issues, including those left open in the plan of reorganization, will be the focus of continuing discussions between the committee and Delta over the coming weeks," the committee said in a statement. "At the same time, the committee will continue to consider potential alternatives in order to maximize the ultimate recoveries for the unsecured creditors in the Delta bankruptcy."

The committee did not elaborate on its carefully worded statement, and a lawyer for the committee, Daniel Golden, did not return repeated calls and e-mails seeking comment.

US Airways issued its own statement Wednesday saying the creditors committee has not decided whether to endorse Delta's plan and is continuing to evaluate US Airways' proposal. US Airways also said it would continue to work with the committee.

Analysts don't expect a quick decision from the committee on whether it supports actually confirming Delta's stand-alone plan, US Airways' buyout offer or any other bid that may come in.

Some believe it's likely US Airways will raise its offer, while other analysts aren't sure it's necessary right now. One thing most agree on: Delta has made clear its desire to remain independent.

Delta says in its plan that after bankruptcy it will be worth as much as $12 billion. Its unwelcome suitor, US Airways, says Delta's value is what it is offering to buy it for. Creditors must decide which proposal makes more sense.

Analysts differed Wednesday on whether Delta's valuation, which it announced in its reorganization plan a day earlier, is realistic in light of high fuel prices, the slowing economy and the airline industry's history in recent years of bad financial news.

Lehman Brothers analyst Gary Chase said in a research note Wednesday that he doesn't buy Atlanta-based Delta's projection that its equity value will be $9.4 billion to $12 billion when it emerges from bankruptcy next spring.

His firm believes the Delta plan is valued at $8 billion to $9.5 billion, which would put it in line with US Airways' offer when the Tempe, Ariz.-based company's promise of $1.65 billion in cost savings from the deal is factored in.

Ray Neidl, an airline analyst with Calyon Securities in New York, agreed immediate decisions aren't likely, but he also said he believes Delta's valuation projection is plausible.

A lot won't be known until Delta says how many shares it plans to issue in the new company and investors decide how much the initial public offering will go for. Even so, Neidl only gives the US Airways proposal a "30 percent to 40 percent" chance of success in its present form.

Neidl noted that expectations for the valuation of UAL Corp.'s United Airlines before it emerged from Chapter 11 were tempered somewhat, but that the IPO was more than what some people thought.

Goldman Sachs said in a research report Wednesday that it believes Delta's post-Chapter 11 equity value will be at the low end of its projected range of $9.4 billion to $12 billion.

Delta, for its part, reiterated Wednesday that it believes the valuation prepared by its advisers is on target.

Money, of course, isn't the only issue. Delta has spent significant time arguing that US Airways' proposal won't pass regulatory scrutiny in part because of the two companies' overlapping routes.

Also Wednesday, Delta said it will begin accepting applications for new-hire pilots in anticipation of exhausting its recall of furloughed pilots next year, and separately the Pension Benefit Guaranty Corp. gave its final approval for a plan to terminate the pensions of Delta's pilots, a key step for the carrier to resolve a multibillion-dollar issue in its bankruptcy case.

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AP Business Writers Dave Carpenter in Chicago and Vinnee Tong in New York contributed to this report.

© 2006 The Associated Press