Selected Investment Report Merger Comments

[USA320Pilot]

In an investment report Lehman Brothers said today:

· Assigning a 60/40 probability of this deal going through with the uncertainty in our minds almost entirely in the DOJ/Antitrust realm. Regulatory hurdles won't be easy, but we think ultimately manageable. If consummated, we expect carve-outs in NYC, Boston, and Washington as well as the Southeast.

· Don't expect rival bids (LCC in a position to be most competitive in our view) or other legacy mergers to follow.

In an investment report J.P. Morgan said today:

· 80% (US/DL Merger) likelihood – We ascribe an 80% likelihood of ultimate creditor and regulatory approval for the proposed US Airways/Delta merger and/or at a minimum a competing bid for Delta. Clearly, lots of twists and turns lie ahead.

· DOJ & Congress are key – Democrats likely to be sympathetic to labor’s concerns, and may be critical of a Republican Justice Department as it relates to consumer issues. DOJ HHI scoring not encouraging, though Washington has been accommodating to airlines as of late (see pensions).

USA320Pilot comment: If you recall, I broke on this website about two months that US Airways was in discussion to buy all or parts of Delta's South American Operation/Equipment, but I did not know about the recent overtures or US Airways' interest in a hostile takevoer attempt.

Regards,

USA320Pilot

 

[careerfurloughee]

USA320Pilot comment: If you recall, I broke on this website about two months that US Airways was in discussion to buy all or parts of Delta's South American Operation/Equipment, but I did not know about the recent overtures or US Airways' interest in a hostile takevoer attempt.

Regards,

USA320Pilot

I thought we were merging with United? Did you say that?

 

[USA320Pilot]

CareerFurloughee:

CareerFurloughee said: "I thought we were merging with United? Did you say that?"

USA320Pilot comments: No, I did not. If you remember I indicated that the former CCY and WHQ executive suites were in discussion on a corporate transaction, but also indicated a deal may or may not proceed. In fact, I reported the 2000 merger offer was forthcoming from United to acquire US Airways to the US Airways ALPA MEC about two months before United's formal offer was made in "open session", which I believe was on March 3, 2000 and then I announced "Project Minnow" (I called them ICT and then UCT) discussions were happening before the news media published "Project Minnow" reports.

By the way, I also first reported on this website that US Airways was in discussion with Boeing on a B737 fleet replacement order with the B737-800 the leading candidate. Yesterday US Airways CEO Doug Parker indidated in the Citigroup 21st Annual Transportation Conference that the Tempe-based company was "absoulutely" in discussions with Boeing on a B737 replacement aircraft order. Did you miss that too?

Best regards,

USA320Pilot

 

[luv2fly]

I'll counter with this. DL and US simply don't fit. UA will definitely enter the equation.

Bankruptcy Court Can Be Tough
Venue for Hostile Takeovers
By MARIE BEAUDETTE and LAURA MCGANN
November 15, 2006 4:20 p.m.

"US Airways Chief Executive Doug Parker faces a major handicap in his $8 billion bid to acquire unreceptive Delta Air Lines Inc.: Bankruptcy courts tend to be poor staging grounds for hostile takeovers.

Unless Delta's management can be persuaded to go along with the deal or its creditors stage a revolt in the bankruptcy court, US Airway's bid is a longshot, bankruptcy experts said Wednesday. Delta has exclusive control over its Chapter 11 case through at least early February, and bankruptcy courts seldom overrule management when things are going smoothly.

Mr. Parker "basically lobbed this Hail Mary pass up in the air to see who's going to catch it," said Fulbright & Jaworski partner William Rochelle. "To be able to have a prayer for success, he's got to be able to generate interest from creditors."

Mr. Rochelle, who represents secured creditors in airline bankruptcy cases, said Parker chose the "least offensive method" to persuade Delta to accept its proposal. Rebuffed by Delta's management, he decided to publicly court the carrier's unsecured creditors, who stand to gain a 45% stake in what would be one of the world's largest airlines.

But Mr. Parker, the America West chief who took the helm of US Airways when it merged with the Arizona-based carrier last fall, could be in for a bumpy ride as he attempts to take over a company protected by the bankruptcy court.

"If management is hostile to the US Airways proposal, US Airways may find it difficult to force its way into the room," said Reed Smith bankruptcy partner Eric Schaffer, who worked on US Airways' first Chapter 11 case. US Airways emerged from its second bankruptcy reorganization in 2005.

Ray Neidl, an airline analyst with Calyon Securities Inc., said convincing Delta's major creditors will be crucial if US Airways wants this deal to work.

"If the creditors see a better proposal, then the management would probably have to listen to them," he said.

Resisting Us Airways' Advances

For now, Delta is still resisting US Airways' advances. Chief Executive Gerald Grinstein responded Wednesday with a terse statement, making it clear that the company still plans to move forward with a stand-alone reorganization and that it intends to invoke its control over its Chapter 11 case to do so.

"The bankruptcy court has granted Delta the exclusive right to create a plan of reorganization until Feb. 15, 2007," he said. "We will continue to move aggressively toward that goal."

Delta, the nation's fourth largest airline, sought Chapter 11 protection on Sept. 14, 2005, about a month before changes to the Bankruptcy Code that sharply curbed debtor control in Chapter 11 cases took effect. Accordingly, the airline can expect to continue to drive its own reorganization process even beyond the current Feb. 15 plan filing deadline.

Companies in Chapter 11 protection are given an exclusive period of time to file a Chapter 11 reorganization plan, but can seek extensions if negotiations with creditors are moving forward. Although last year's bankruptcy law changes limit those to a maximum of 18 months, Delta could potentially enjoy unlimited extensions -- as did UAL Corp., the parent of United Airlines, which spent more than three years in bankruptcy.

Creditors can seek to end a company's exclusive control over its Chapter 11 case so they can file their own reorganization proposals. But bankruptcy experts say Delta's creditors would face an uphill battle wresting control from a team of competent executives managing a viable company.

Over the last year or so, Delta has negotiated deals to terminate its pilots' pension plan, obtained $280 million in annual wage-and-benefit concessions from its pilots, and said it's "on track" to exit Chapter 11 proceedings by the middle of 2007. The airline has also recalled 1,000 flight attendants in preparation for a major expansion of its international routes.

"Bankruptcy courts don't terminate exclusivity easily or quickly," Mr. Rochelle said. "It takes a lot of banging on the door before things happen."

In the absence of a deal with management, convincing a pivotal group of unsecured creditors -- the official committee that represents them in the airline's Chapter 11 case -- will be key.

The panel, formed early in every Chapter 11 case and usually made up of the largest unsecured creditors, has significant influence in a bankruptcy case and can be instrumental in swaying the court to second-guess a debtor company's business judgment.

The Delta committee, which includes aircraft financier Boeing Capital Corp., the federal Pension Benefit Guaranty Corp., Bank of New York Co. and the Air Line Pilots Association, hasn't yet shown its hand. Calls to committee members and the attorney who represents them weren't returned Wednesday.

US Airways could choose to buy Delta's unsecured claims in order to gain a foothold in the case and command the committee's attention, a move potential buyers often employ in smaller Chapter 11 cases.

For example, the hedge fund Harbinger Capital Partners forced an exclusivity battle in the bankruptcy of West Coast jewelry chain Crescent Jewelers and ultimately won control of the company post-bankruptcy. Harbinger later merged the company with another company it bought out of Chapter 11 -- East Coast chain Friedman's Inc.

Financier Ron Burkle's Yucaipa Cos. has bought up unsecured debt of rival auto-hauling companies Allied Holdings Inc. and Performance Transportation Services Inc., which are both operating under Chapter 11 protection, and is expected to attempt to merge them post-bankruptcy.

US Airways, whose smooth merger last fall with America West had management backing, has the experience of two past Chapter 11 cases as it moves forward with its proposal.

The airline could ally itself with other major creditors to force Delta -- or the Manhattan bankruptcy court -- to move toward a merger.

"Management will have to consider what the creditors want," Mr. Neidl said. "It's the most important element of the company now, and they'll at least have to listen to their opinion."

But Mr. Rochelle of Fulbright & Jaworski said he'd be surprised if Delta and its major creditors "ran off in different directions."

He also questioned whether US Airways' Mr. Parker, widely regarded as a savvy executive who saved his airline from extinction, would want to be the architect of a deal built on a bitter battle between Delta and its creditors.

"I don't know whether Doug Parker would want to do it on a highly adversarial basis," Mr. Rochelle said. "That would really not create the kind of an effective working environment you need to integrate three airlines."

Best regards,

luv2fly

And yet another.
link

 

[pilot]

Seems to me this offer from Parker is simply a logical way for him (LCC) to begin discussions with DAL's creditors. What comes from those discussions may well be what Parker ultimately has in mind.

And I don't think it is a merger between the two companies. It may be the purchase of certain DAL assets that would enable LCC to further enhance specific portions of its operation. Whether that be in Europe, South America, Hawaii, the Carribean or elsewhere is a guess.

A hostile takeover of a company with PO'd employees who would hook up with even more PO'd employees just doesn't make sense. But then, PHL doesn't make sense and that hasn't stopped anyone at LCC from attempting to build onto the worst station in the system.

My bet is that he wants something from DAL. Just not the whole ball of wax.

pilot

 

[EyeInTheSky]

Lark, Lark, where are you Lark???

 

[UnitedChicago]

USA320Pilot comment: If you recall, I broke on this website about two months that US Airways was in discussion to buy all or parts of Delta's South American Operation/Equipment, but I did not know about the recent overtures or US Airways' interest in a hostile takevoer attempt.

[/font]

OMG - how could your sources have not let you know?

 

[Busdrvr]

USA320, just curious, do you even know what HHI scoring is or how it's calculated?

Sorry, I have trouble with the notion this will pass. I will go out on a limb and say there is a 35% chance of ANY delta merger/carveout over the next year.

- Let's see.... What dems just rose to power.... While majority leader Reid is from LAS, there is Durbin, Pelosi, Kohl and several others from key non US regions who will listen to their constituents from other unions...

- In the Carolina's, Georgia and the rest of the deep south, if you ask them which airlines serve the big city, the response you'll get is "Both of them.....US Air and Delta" They've never even heard of UAL, CAL, AMR or NWA.

- To get legit HHI numbers, the "new" US Air would essentially have to sell off almost all of the "old" US Air.

Labor: Short term pain, long term gain. Less Airlines mean less unions undercutting each other. It's like herding cats.

These are interesting times indeed.

 

[ClueByFour]

If my memory serves, the good people at Lehman also thought the US/UA merger had a high possibility of happening. Oops.

 

[USA320Pilot]

Delta seeks creditor help to fend off US Air bid: report

"US Airways officials were trying to arrange a meeting with representatives of Delta's official creditors committee, the WSJ said. It cited people familiar with the situation as saying that such a meeting could come as early as next week, with Delta officials expected to attend."

See Story

Regards,

USA320Pilot

 

[Dog Wonder]

Delta seeks creditor help to fend off US Air bid: report

"US Airways officials were trying to arrange a meeting with representatives of Delta's official creditors committee, the WSJ said. It cited people familiar with the situation as saying that such a meeting could come as early as next week, with Delta officials expected to attend."

See Story

Regards,

USA320Pilot

Did they invite you?

 

[LGA Fleet Service]

Just out of curiosity, do any of the US Executives have stock options vesting in the next week or two?

One would think US corporate council would indeed know how difficult it is to "Board & Secure" a company currently operating under Chapter 11 protection.

My cynical nature tells me this is nothing more than a neatly packaged cover story to drive the stock price up nicely as options come up on their excise dates.

 

[SoftLanding]

Am still wondering if this whole exercise was a way to put US Airways in play?!

One of the early investors in LCC is still sitting on his shares...Several million shares, and getting LCC bought out at...let's say $80'ish, we're talking some serious $$$ here...

No matter what, AMR/CAL/UAL will most likely be heard from soon...