Delta adviser to (US Airways') study bid

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Today I flew from LGA to DCA on a Shuttle flight with Doug Parker and members of US Airways’ senior management team onboard our aircraft. I had the opportunity to speak with Parker about the merger. US Airways officials met with Gordon Bethune on Sunday and Monday in New York City and Parker indicated the meeting went “extremely wellâ€. Senior management was meeting today with Congressional and Justice Department officials in Washington to discuss the proposed Delta merger.

Parker indicated the Morgan Stanley agreement was very good news for US Airways and that Bethune was meeting with the Delta’s creditor’s committee on Wednesday, January 10, without a US Airways or Delta representative in attendance.

Next we talked about Ted Reed’s column in yesterday’s TheStreet.com titled “Delta Remains Wary of Mergerâ€.

See Story

Parker confirmed my thought that Delta appears to be “grasping for straws†with their position that that the US Airways - Delta combination "could set off a consolidation wave that would leave the Atlanta-based airline in a weaker position.â€

Regards,

USA320Pilot
 
And despite all of this, it's still out of Parker's hands. He's got no leverage. It's all up to the DL creditors. His opinion or thoughts on the matter are, for all intents and purposes, worthless.

This does bring up one interesting facet that's often (conveniently) left out of the discussion: if DL emerges standalone, the creditors get paid now, whereas if the merger takes place, they get to watch the LCC stock price potentially drop (devaluing their stake), DL will languish in court longer, and the aforementioned Justice department will take a year or longer to come to a decision on the merger. I'm betting that Gordo is going to point this out to the creditors--since he dislikes Tempe for the end of the HP codeshare and dislikes any remaining portion of the US-east management. For a blowhard, Gordo did something Doogie has thus far proven unable to do--operate a large airline with anything approaching acumen.
 
You forgot, Gordo did use the courts to right CO the second time.

He was well liked at PI, but left when he realized he would progress no further,then went to work for Boeing.

Even if DL denies the bid, once they emerge he can make a hostile bid, or at this moment US could set up a front company and buy numerous of DL's obligations and claims to get a foot in the door.

There are more then one way to skin a cat.
 
USA320Pilot said:

Parker confirmed my thought that Delta .....
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MOM

I guess your bud doogie didn't let you in on his lastest gaff.....you know the one where he called DL's valuation "unrealistic". I sure he also told you about his latest plan to raise his offer to match what DL had been saying it was worth all along and you just forgot to post it last night, right?

See ya on the Barbie Jets.......

Oh BTW, how is Ralphie?
 
ClueByFour said:
This does bring up one interesting facet that's often (conveniently) left out of the discussion: if DL emerges standalone, the creditors get paid now, whereas if the merger takes place, they get to watch the LCC stock price potentially drop (devaluing their stake), DL will languish in court longer, and the aforementioned Justice department will take a year or longer to come to a decision on the merger.
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Very inaccurate. Yes, upon a standalone exit from bankruptcy, DL creditors will be given new value in the form of shares of the newly reorganized airline. However, it would be foolish to cash in on those shares immediately as the value of those shares typically are drastically less than the value estimated by the Debtor's plan of reorganization. Historically, it often takes 3-5 years for the stock to reach the value that the Debtor's plan stated would be the debtor's value upon exit from bankruptcy. (This does not take into account companies that exit from bankruptcy and then merge, as the value will sometime surge upon M & A activity). Often, the stock never reaches the value that the Debtor predicted. You see, CEO's value their company based upon a 3-year or 5-year horizon... suggesting that their company is worth this because we will meet such and such goals in the future (forward looking statements). However, Wall Street looks more to the past (quartely reports) to determine the value of the company. So, in sum, the debtors may get their predicted 40-60% of their claim... but it could be 5 years after exit from bankruptcy, when DL meets all the expected goals in the 5 year horizon... since their value is based upon meeting ALL its goals in its 5-year plan!

On a DL/US plan, upon exit from bankruptcy creditors will get paid... 5 billion in CASH, plus shares. Sure, it may take several months extra to exit from bankruptcy, but they would get money upon exit.
 
Gilding the Lily said:
On a DL/US plan, upon exit from bankruptcy creditors will get paid... 5 billion in CASH, plus shares. Sure, it may take several months extra to exit from bankruptcy, but they would get money upon exit.
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I'd love to know the basis for that statement.

You do know that US is still settling claims over 15 months after emerging from BK? You do realize that US just filed it's 8th & 9th objection to claims, seeking to have them thrown out, over 15 months after emerging from BK? All of this has been under Parker's leadership. Why do you believe that the DL creditors will all get paid at BK exit?

On a somewhat related note, I get the impression that everyone assumes that each unsecured creditor that makes it through the claim rejection gauntlet will get their prorated share of cash and stock - the "They'll get some cash instead of just stock" rationale.

I'd love for someone to point out where that's been said or written.

The reason I ask is that there are 3 creditors who may hold as much as 2/3 of the valid unsecured claims at the end of the process, assuming that the estimates of $15 - $16 billion in unsecured claims turns out to be accurate.

Two of them are the "900 lb gorilla's" on the creditor committee - ALPA and the PBGC, with almost $4.5 billion in claims between them. Their claims, by stipulation, are general unsecured claims so they won't get any special treatment.

The third is potentially the 2000 lb gorilla among the unsecured creditors - the good ole IRS who will hold priority tax claims. DL has already said that priority tax claims will be paid in cash. If that remains the case, that could use up the cash part of the US offer - leaving only stock for the remaining unsecured creditors.

Jim
 
ClueByFour said:
And despite all of this, it's still out of Parker's hands. He's got no leverage. It's all up to the DL creditors. His opinion or thoughts on the matter are, for all intents and purposes, worthless.

This does bring up one interesting facet that's often (conveniently) left out of the discussion: if DL emerges standalone, the creditors get paid now...
Click to expand...


DL Standalone:
The creditors get reissued DL stand-alone stock under a new symbol.

New DL:
The creditors get "new DL" stock and cash, under the LCC symbol.

Which is better ? I dunno, but follow di- monet.
 
BoeingBoy said:
I'd love to know the basis for that statement.

You do know that US is still settling claims over 15 months after emerging from BK? You do realize that US just filed it's 8th & 9th objection to claims, seeking to have them thrown out, over 15 months after emerging from BK? All of this has been under Parker's leadership. Why do you believe that the DL creditors will all get paid at BK exit?

Jim
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Jim,

Yes, I used generalizations. I post messages that people who are "read-up" on the issues may respond in agreement or disagreement. I assume, apparently to my misfortune, that you and other knowledgeable posters have a general understanding of bankruptcy and, more specifically, airline bankruptcies. I acknowledge that my assumptions about poster's understandings may be off-based at times. You have shown a higher-than-usual understanding of the bankruptcy process so I will try my best to explain this.

To answer your post... in nearly EVERY chapter 11 bankruptcy the trustee is going to file objections to claimants... usually over the amount of the claim or whether a claim exists at all. It doesn't take a stretch of the imagination to know that once a large company files for bankruptcy, tons of scammers file claims in the bankruptcy in attempt to receive an unwarranted payday. These objections are part of a process to weed those out, as well as the claims that are over-valued.

Now, to the meat of your question... I do realize that US is still settling claims (even after exit). This is typical and is not an outlier case at all.

Now let me ask you this Jim:

Will the trustee not be the same under a DL standalone as it would under as DL/US? Yes, same trustee.

Will the trustee not have the same duty to creditors? Yes, the same duties.

Don't all the creditors want the fraudulent claims to be dismissed? Yes, so they can get a bigger piece of the pie.

Will it not be the same amount of claims whether it s DL or DL/US? Yes, the same amount of claims.

Will the trustee not object to these claims if it was DL standalone rather than DL/US? Yes, the trustee will object regardless if it is US or US/DL.

I trust that you are getting the point now. In essence, whether it is DL or US/DL the trustee will object to all the claims that it suspects may be at fault. Some of those objections will take many months, regardless if it is DL or US/DL.

The wording "paid at exit" is a general phrase often used when the Debtor will dish out CASH upon the distribution of the plan. Upon distribution, those unsecured creditors who have claims without disputes will have the new value distributed to them. See 11 U.S.C. 502 for a laundry list. Furthermore, if claims are disputed, unliquidated or contingent, or otherwise objectionable, the plan must contain provisions to permit payments to be made to satisfy these claims after they have been resolved through settlement or litigation as part of the chapter 11 case. One way of providing for such payments is the creation of adequate reserves of assets earmarked for such purpose. This is what US did in its last bankruptcy and undoubtedly what DL will do regardless if it is DL standalone or DL/US. Although distribution for undisputed claims and exit have varying dates, they are often around the same time period.

Thus, upon exit/distribution the undisputed claimants under a DL/US plan will be paid cash. Like I mentioned earlier, the exit timeframe may be longer under the US/DL plan but the creditors will get cash and shares upon distribution, rather than just shares, which may take significant time to adequately represent the value that DL believes it is worth.


BoeingBoy said:
On a somewhat related note, I get the impression that everyone assumes that each unsecured creditor that makes it through the claim rejection gauntlet will get their prorated share of cash and stock - the "They'll get some cash instead of just stock" rationale.

I'd love for someone to point out where that's been said or written.

The reason I ask is that there are 3 creditors who may hold as much as 2/3 of the valid unsecured claims at the end of the process, assuming that the estimates of $15 - $16 billion in unsecured claims turns out to be accurate.

Two of them are the "900 lb gorilla's" on the creditor committee - ALPA and the PBGC, with almost $4.5 billion in claims between them. Their claims, by stipulation, are general unsecured claims so they won't get any special treatment.

The third is potentially the 2000 lb gorilla among the unsecured creditors - the good ole IRS who will hold priority tax claims. DL has already said that priority tax claims will be paid in cash. If that remains the case, that could use up the cash part of the US offer - leaving only stock for the remaining unsecured creditors.
Jim
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Good question. Ok, the bid is for $5b in cash. Assuming that the valid unsecured claims are worth $15b. Thus, mathematically, the cash offer is for 33% of the unsecured claims. Therefore, each unsecured claimant would receive a pro-rata share of the cash (33 cents on the dollar).

In regards to the IRS priority claims. Those are usually handled in a seperate class than unsecured claims and will often be paid the full settled-upon amount in cash. DL provided for this in its plan, treating the IRS priority claims as seperate than unsecured (law provides for this). Thus, assuming that US would do the same thing, it is likely that the $5b is not limited by the IRS tax claims. I admit, however, that this is just an educated guess.
 
I didn't mean to imply that the US BK was an exception, for certainly it wasn't/isn't. Just responding to what seems to be a general perception that unsecured creditors will receive value for their claim sooner under the merger proposal and that some of that will be in cash. Neither is necessarily true and at least the first is arguably false. As for which plan will provide more value, it's all opinions at this point and will continue to be so until the creditor receives their "payout" under one or the other plan and if the merger proceeds they will have no idea if they're getting more or less than the stand alone plan would have provided.

Call me picky. I'll gladly debate the facts, assuming I believe I have enough facts to even enter the debate (and, yes, I'm as guilty as anyone of thinking I know facts that turn out to be wrong). Likewise, I'll debate opinions - like any pilot, I can come up with an opinion on just about anything and firmly believe it's right.

It's debating opinions or broad generalizations that seem to be presented as facts in the specific sense where I have a problem. Sorta like looking out the window at 2AM on a summer night and saying the sun's out based on the generalization that it's out more hours per day than not. The accuracy of the generalization doesn't make the specific statement accurate.

Anyway, no harm no foul as far as I'm concerned. I've certainly learned a few things from your posts and look forward to learning some more.

Jim
 
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