Delta Air Lines Inc. said Tuesday it has commitments from six major banks for $2.5 billion in exit financing as it aims to emerge from bankruptcy protection independently.
The exit financing is a major step forward in Delta’s bankruptcy process and signals its determination to emerge as a stand-alone airline in the face of an unwanted $9.8 billion takeover bid from rival US Airways Group Inc.
The financing deal could be seen as a symbolic seal of approval for Delta’s plan from Wall Street’s blue-chip lenders.
“These banks have looked at the stand-alone business plan that Delta has come up with and this is their giving credibility to it,” said Fruman Jacobson, a lawyer at Sonnenschein Nath & Rosenthal, which represented unsecured creditors in the bankruptcy of UAL Corp., parent of United Airlines.
The financing will be co-led by JPMorgan Chase & Co. , Goldman Sachs Group Inc., Merrill Lynch & Co. Inc., Lehman Brothers Holdings Inc., Swiss bank UBS, and Barclays Capital, the investment banking unit of British bank Barclays.
US Airways has Citigroup and Morgan Stanley backing its bid.
Where the money goes
Delta’s arrangement replaces the $2.1 billion in financing it took on while in bankruptcy. The money will also be used to make payments required upon exit from bankruptcy, such as paying advisers, and to increase the company’s cash balance.
Atlanta-based Delta, which has been operating under bankruptcy protection since September 2005, has said it wants to emerge from bankruptcy this spring.
US Airways has set a Feb. 1 deadline for support from Delta’s main creditor committee, which has so far not publicly announced its intentions.
“The competitive terms and unique structure of this financing package reflect our considerable progress and the soundness of Delta’s stand-alone plan,” Delta Chief Financial Officer Edward Bastian said in a statement. “We appreciate the confidence the financial markets are showing by making this commitment in support of Delta’s stand-alone plan.”
