US Airways Increases Bid for Delta
Wednesday, January 10, 2007; 9:36 PM
ATLANTA -- US Airways increased the pressure on Delta Air Lines' unsecured creditors to take its buyout offer by raising the bid Wednesday nearly 20 percent to $10.3 billion. Whether the deal would survive regulatory scrutiny may be the deciding factor.
The Tempe, Ariz.-based company also set a Feb. 1 deadline for certain conditions to be met or its entire bid would be revoked.
The ball is now in the creditors' court.
The question is whether they want to take the money US Airways is offering and run the risk of a long regulatory fight, or stick with Delta's plan to emerge from bankruptcy by the middle of this year as a standalone company worth $9.4 billion to $12 billion.
Daniel Golden, a lawyer for Delta's official unsecured creditors committee, did not return several phone calls Wednesday seeking comment. Most of the large creditors on the committee have refused to discuss their position publicly, except Delta's pilots union, which opposes the merger.
An unofficial group of unsecured creditors issued a statement calling on Delta "to provide thoughtful and unbiased consideration" to the enhanced offer. It urged the airline's management to cooperate fully with US Airways' efforts to get information and not to deter alternatives from other companies that could provide stakeholders greater recoveries than under a standalone reorganization. The group represents creditors holding about $2.3 billion in claims against Delta.
Delta management has argued that the combination of US Airways and Delta would not receive regulatory approval because of the overlap of the two carriers' routes. US Airways says there wouldn't be any regulatory holdup.
A Jan. 24 hearing has been scheduled by the Senate Committee on Commerce, Science and Transportation on the state of the airline industry and the potential impact of airline mergers.
Ray Neidl, an airline analyst with Calyon Securities in New York, said the increased offer will be more attractive to Delta's creditors, but the great unknown is whether regulators would approve the deal.
"In my opinion, that's going to be the main thing," Neidl said, adding that he gives the US Airways bid a 50-50 chance of being successful.
US Airways Group Inc. Chief Executive Doug Parker told analysts Wednesday there's an easy way to know who is right on the regulatory issues.
"Let's just go ask them and find out," Parker said of regulators. Parker was in Washington on Wednesday to talk to lawmakers.