Delta Debt Exchange So Far Only Successful For 2 Classes
By ELIZABETH SOUDER
November 3, 2004 11:18 a.m.
Of DOW JONES NEWSWIRES
NEW YORK -- Holders of Delta Air Lines Inc. (DAL) unsecured debt have only tendered enough debt in an ongoing exchange offer to meet minimum requirements for two debt classes, despite incentives for holders to tender early.
Delta said in a press release late Tuesday that one week after the deadline for early exchange, about $252 million in aggregate principal amount of short-term securities has been tendered. That means the exchange offer for the total $330 million in short-term debt will be successful.
But the short-term debt is the smallest portion of the offer, accounting for 12% of the $2.6 billion in unsecured debt the deal encompasses. Delta said the intermediate and the long-term securities classes haven't yet tendered enough debt to meet minimum requirements.
The offer to exchange $2.6 billion in unsecured debt for $680 million in secured notes expires Nov. 18, but Delta had offered incentives, including equity shares, for debt holders to tender by Oct. 26. Already Delta had extended the exchange after a prior offer failed.
The Atlanta airline said if other debt classes don't meet minimum requirements for the exchange, Delta will use the assets earmarked as collateral for that portion of the exchange to meet other liquidity needs.
Analysts have said the exchange offer is a critical piece of Delta's plan to restructure out of bankruptcy, but still just one piece of the plan.
Some analysts say accepting the tender offer is a no-brainer for unsecured debt holders, who could end up with nothing if the airline files for bankruptcy. Other analysts point out that debt holders are often loathe to accept concessions outside of bankruptcy for fear that, if the company files for bankruptcy, the judge will force them to accept another cut.
The debt exchange, as well as other financing deals, is contingent upon the airline's pilots ratifying a new contract that cuts pilot costs by $1 billion. Pilot voting ends Nov. 11.
-By Elizabeth Souder, Dow Jones Newswires; 201-938-4148; elizabeth.souder@dowjones.com