USA320Pilot
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Delta's plan
Delta came out with its own plan to emerge from Chapter 11 today. It is full of information and even has a funny exclusion - "The figures don't include an executive compensation package, which the airline says would be added later." Now why would that be excluded you ask? (You should ask this now and again at the end of this story)
Here's the essence of Delta's plan:
- A valuation between $9.4bn and $12bn. That’s a 20% spread and is 10-30% higher than the existing US Airways bid. On what grounds is that valuation being made? Its the first a few odd items. Advantage US Airways.
- Delta offers no cash payout to creditors. Which is odd because you would think creditors have been burned and want cash which is why US Airways is offering some cash. Advantage US Airways.
- The blueprint for a new Delta is an all-equity valuation with no cash payout to creditors, who would receive a return of 63% to 80% of the current value of their claims. How is this calculated? Is it based on the inflated stock valuation (due to the US Airways bid)? Advantage US Airways.
We expect Wall Street to tear this deal apart and compare it with the US Airways offer. So far it does not look good for Delta. We think Delta's plan seems rather weak particularly since there's no cash to creditors. If this demonstrates Delta has no cash to use, that should tell the story right there. Because you would think that with lower fuel costs and an eviscerated cost structure under Chapter 11 would have generated buckets of cash. Where is that money?
See Story
Regards,
USA320Pilot
Delta came out with its own plan to emerge from Chapter 11 today. It is full of information and even has a funny exclusion - "The figures don't include an executive compensation package, which the airline says would be added later." Now why would that be excluded you ask? (You should ask this now and again at the end of this story)
Here's the essence of Delta's plan:
- A valuation between $9.4bn and $12bn. That’s a 20% spread and is 10-30% higher than the existing US Airways bid. On what grounds is that valuation being made? Its the first a few odd items. Advantage US Airways.
- Delta offers no cash payout to creditors. Which is odd because you would think creditors have been burned and want cash which is why US Airways is offering some cash. Advantage US Airways.
- The blueprint for a new Delta is an all-equity valuation with no cash payout to creditors, who would receive a return of 63% to 80% of the current value of their claims. How is this calculated? Is it based on the inflated stock valuation (due to the US Airways bid)? Advantage US Airways.
We expect Wall Street to tear this deal apart and compare it with the US Airways offer. So far it does not look good for Delta. We think Delta's plan seems rather weak particularly since there's no cash to creditors. If this demonstrates Delta has no cash to use, that should tell the story right there. Because you would think that with lower fuel costs and an eviscerated cost structure under Chapter 11 would have generated buckets of cash. Where is that money?
See Story
Regards,
USA320Pilot