US Airways Withdraws Bid for Delta
Wednesday, January 31, 2007; 6:37 PM
ATLANTA -- US Airways Group Inc. dropped its $9.8 billion hostile bid for Delta Air Lines Inc. on Wednesday after a key group of the bankrupt carrier's creditors said Delta would be better off emerging from Chapter 11 on its own.
With the dual decisions, Atlanta-based Delta cleared a big hurdle in its effort to exit bankruptcy by the middle of this year as a stand-alone company.
But it isn't out of the woods yet. Smaller creditors could ultimately vote not to approve Delta's reorganization plan, and some have already filed objections to the disclosure statement to the Delta plan.
A Feb. 7 hearing in bankruptcy court in New York is scheduled to discuss the disclosure statement. If the statement related to Delta's operations is approved, Delta could begin soliciting votes for approval of its reorganization plan. Delta hopes to hold a confirmation hearing on its plan in April.
US Airways disclosed its initial hostile bid for Delta on Nov. 15. US Airways later raised its bid by nearly 20 percent in hopes of swaying Delta's official committee of unsecured creditors.
"Using the bankruptcy process the right way, Delta people have transformed their company's business model," Delta Chief Executive Gerald Grinstein said in a statement. "Our focus now is on the work still before us to emerge from Chapter 11 this spring as a strong, healthy, and vibrant global competitor."
In his own statement, Doug Parker, chief executive of Tempe, Ariz.-based US Airways, said he was disappointed by the decision by the creditors committee. His airline quickly withdrew its bid, which was set to expire Thursday if the committee did not show support for moving the bid forward.
Parker said the committee "is ignoring its fiduciary obligation" to the creditors it represents.
"Our proposal would have provided substantially more value to Delta's unsecured creditors than the Delta standalone plan," Parker said.
Delta's official unsecured creditors committee said in a statement it reached its decision after a lengthy review of both Delta's proposal and US Airways' proposal.
Analysts had said regulatory concerns over US Airways' proposal might be a bigger issue than the money at stake. Delta had said the US Airways proposal would cause a significant delay in Delta's emergence from Chapter 11 because of how regulators would view the overlapping routes of the two carriers. US Airways had argued regulatory issues would not cause a delay.
Delta has said it projects it will be worth $9.4 billion to $12 billion when it emerges from bankruptcy. Its management had said repeatedly it wanted the carrier to remain on its own and not combine with US Airways.