USAir and Delta....no go!

[wings396]

My blood pressure is great, and I don't drink thank you. Maybe you can revise your heading to say " I think the deal is a no-go"...That would sound much better. It appears to me and a few others that you jumped the gun a bit with your assumption of what the outcome of this deal will be. I very much enjoy this message board, but I prefer to read factual information instead of senseless crap such as yours. You started a topic which was based on nothing more than speculation... :unsure:
I could see your point if all of the creditors had officialy rejected the bid from US, but I don't believe that has happend as of yet...Or did they call you ahead of letting anyone else know so that you could inform all of us on this board??? :blink:

 

[abe]

My blood pressure is great, and I don't drink thank you. Maybe you can revise your heading to say " I think the deal is a no-go"...That would sound much better. It appears to me and a few others that you jumped the gun a bit with your assumption of what the outcome of this deal will be. I very much enjoy this message board, but I prefer to read factual information instead of senseless crap such as yours. You started a topic which was based on nothing more than speculation... :unsure:
I could see your point if all of the creditors had officialy rejected the bid from US, but I don't believe that has happend as of yet...Or did they call you ahead of letting anyone else know so that you could inform all of us on this board??? :blink:

I like this message board too, wings. But with all do respect, much of it isn't factual and most is based on personal opinions. I'm sure you realize this. If you thought my post title was going to contain some inside info that would shock the world, I'm sorry to offend you. My intention was to spark some debate for all of us here who have no say in this thing anyway (I doubt Doug and Jerry are taking notes on this board).

I spelled out the reasons that this deal won't go down. If you disagree with them, how 'bout a serious rebuttle.

If you think my reasons are senseless, I would welcome your wisdom to straighten me out! As I've said several times now I am not an insider.

The facts speak for themselves. There has been no positive vibe from any of the "real" players about this deal. A few bondholders forming an alliance is not a big deal. The only real creditor who has rendered an opinion is the Delta pilot leadership. When Boeing or one of the other big creditors signs off on this thing, then maybe Parker will have something.

I stand by my statement that this deal is done. I'd love to hear some concrete arguments about why I am wrong.

Abe

 

[Gilding the Lily]

I like this message board too, wings. But with all do respect, much of it isn't factual and most is based on personal opinions. I'm sure you realize this. If you thought my post title was going to contain some inside info that would shock the world, I'm sorry to offend you. My intention was to spark some debate for all of us here who have no say in this thing anyway (I doubt Doug and Jerry are taking notes on this board).

I spelled out the reasons that this deal won't go down. If you disagree with them, how 'bout a serious rebuttle.

If you think my reasons are senseless, I would welcome your wisdom to straighten me out! As I've said several times now I am not an insider.

The facts speak for themselves. There has been no positive vibe from any of the "real" players about this deal. A few bondholders forming an alliance is not a big deal. The only real creditor who has rendered an opinion is the Delta pilot leadership. When Boeing or one of the other big creditors signs off on this thing, then maybe Parker will have something.

I stand by my statement that this deal is done. I'd love to hear some concrete arguments about why I am wrong.

Abe

Although I think the deal will go through, I do think you may be partially right about Boeing. Delta is a huge customer of Boeing. US has done some business with Boeing; but it has recently entered into a major contract with Airbus. Boeing may be frightened that a merged US/Delta would bring business to it biggest competitor (Airbus) and, thus, may think it is better to stay with Delta's 'come out alone' plan.

However, Boeing is both a secured and unsecured creditor. They are secured up to the amount of the value of the aircrafts and other assets; but those do not cover all the debts and, thus, is unsecured from that point on. Knowing that, Boeing will be very concerned about getting paid and not just receiving pennies on the dollar. It may be highly influenced by the "money on the table" provided by US.

Sure, Delta will be able to obtain tons of DIP financing; but the terms will not be nearly as favorable as US's financing (Delta's DIP financiers would be considered preference creditors and would receive most of the monies due upon a default post discharge).

Lastly, as many of you have noted, many consultants, lawyers, advisors, and analysts have praised the efforts toward airline consolidation. For example, take a look at the quotes of 'third party' advisors during the American West/US merger talks and the speculations of United/Continental merger. Now, many of these analysts, lawyers, and consultants are currently advising both Delta and US.

 

[NewHampshire Black Bears]

I like this message board too, wings. But with all do respect, much of it isn't factual and most is based on personal opinions. I'm sure you realize this. If you thought my post title was going to contain some inside info that would shock the world, I'm sorry to offend you. My intention was to spark some debate for all of us here who have no say in this thing anyway (I doubt Doug and Jerry are taking notes on this board).

I spelled out the reasons that this deal won't go down. If you disagree with them, how 'bout a serious rebuttle.

If you think my reasons are senseless, I would welcome your wisdom to straighten me out! As I've said several times now I am not an insider.

The facts speak for themselves. There has been no positive vibe from any of the "real" players about this deal. A few bondholders forming an alliance is not a big deal. The only real creditor who has rendered an opinion is the Delta pilot leadership. When Boeing or one of the other big creditors signs off on this thing, then maybe Parker will have something.

I stand by my statement that this deal is done. I'd love to hear some concrete arguments about why I am wrong.

Abe

//////////////////////////////////////////////////////////

"ABE"............do YOU know WORLD TRAVELER, by any chance ???????


Curious minds would like to know !!

NH/BB's

 

[wings396]

Although US has been doing business with Airbus, that could easily change. If this merger takes place, the combined carrier will buy Aircraft from whoever offers them the best deal, and the quickest deivery schedule. The old US East at one time was a steady Boeing customer, until US didn't follow thru with a deal on a few remaining 757's which resulted in a lawsuit. When the US management team of W&G placed the big Airbus order, Boeing was pretty much tied up with their delivery schedule to the other majors who had committed to large orders with them. I recall hearing that if US had placed an order with Boeing at that time, it would have been a several year wait until any Aircraft were delivered at all. Given the problems that Airbus is having with both the A-350 and the 380, I wouldn't be suprised at all to see a major shift to Boeing from several carriers. If this deal goes thru, I can't see the management cancelling any current orders they have with Boeing. Given that Doug and his gang are well aware of Boeing's postion in this $8B offer, I'm certain they will be more than willing to accomidate any concerns that Boeing has.

 

[michael707767]

Lastly, as many of you have noted, many consultants, lawyers, advisors, and analysts have praised the efforts toward airline consolidation.

lawyers, consultants, advisors, etc, want mergers because they all make money when they happen. They don't care if mergers make sense, they don't care if people lose jobs or the consumer pays more in the long run.

I'm not saying consolidation won't happen, but never forget the talking heads have different reasons for why they want it. They don't know or care about whats best for the industry.

 

[abe]

Although US has been doing business with Airbus, that could easily change. If this merger takes place, the combined carrier will buy Aircraft from whoever offers them the best deal, and the quickest deivery schedule. The old US East at one time was a steady Boeing customer, until US didn't follow thru with a deal on a few remaining 757's which resulted in a lawsuit. When the US management team of W&G placed the big Airbus order, Boeing was pretty much tied up with their delivery schedule to the other majors who had committed to large orders with them. I recall hearing that if US had placed an order with Boeing at that time, it would have been a several year wait until any Aircraft were delivered at all. Given the problems that Airbus is having with both the A-350 and the 380, I wouldn't be suprised at all to see a major shift to Boeing from several carriers. If this deal goes thru, I can't see the management cancelling any current orders they have with Boeing. Given that Doug and his gang are well aware of Boeing's postion in this $8B offer, I'm certain they will be more than willing to accomidate any concerns that Boeing has.

You're talking about the past, I'm talking about the present and the future. Delta and Boeing have a real partnership. When Wolf and other airline CEO's were making sweetheart deals with Airbus, Delta announced they would be a Boeing-only airline.

Your scenario sounds pretty far fetched to me. I'm sure Parker is tap-dancing all over the room during these meetings, telling Pratt that he will only buy their engines...only Boeing jets....ban Pepsi from all flights...etc, but these guys aren't stupid. (Just like the BS he's spouting about pay raises and job security for all the employees in this nightmare of a deal!)

I may be wrong, but wasn't Airbus heavily involved with the US/AWA merger? I thought I remember reading that they were big money investors in that deal, with USAirways in turn becoming the launch customer for the 350 and placing a large order to jump start that new airplane.

Abe

 

[eolesen]

There's one fatal flaw in all this "creditors may like DL's offer better" line of argument --- who is going to front the money necessary to pay the unsecured creditors, and does DL standing on its own generate enough cashflow to make good on their commitments?

US Airways already has the financing lined up. DL doesn't, otherwise they would have already come forward with their POR for approval.

Long term relationships don't mean squat in bankruptcy, Abe.

If Coke, Pratt and/or Boeing turn down an offer that pays more, and DL winds up defaulting on that at a later date, then they've each violated the fiduciary right the owe to THEIR shareholders. Violate that, and you've got shareholder lawsuits.

 

[Gilding the Lily]

lawyers, consultants, advisors, etc, want mergers because they all make money when they happen. They don't care if mergers make sense, they don't care if people lose jobs or the consumer pays more in the long run.

I'm not saying consolidation won't happen, but never forget the talking heads have different reasons for why they want it. They don't know or care about whats best for the industry.

Yes, you are right. The only people who really care about the employees, jobs, and consumers are exactly the people who do not have any say on whether the merger goes through. It is unfortunate; but the people involved in the decision making have ulterior motives (some of them are actually honest about their motives).

 

[Gilding the Lily]

There's one fatal flaw in all this "creditors may like DL's offer better" line of argument --- who is going to front the money necessary to pay the unsecured creditors, and does DL standing on its own generate enough cashflow to make good on their commitments?

US Airways already has the financing lined up. DL doesn't, otherwise they would have already come forward with their POR for approval.

Long term relationships don't mean squat in bankruptcy, Abe.

If Coke, Pratt and/or Boeing turn down an offer that pays more, and DL winds up defaulting on that at a later date, then they've each violated the fiduciary right the owe to THEIR shareholders. Violate that, and you've got shareholder lawsuits.

Delta does have some creditors lined up for DIP financing; but it is inferior to the financing lined up by US. Delta hasn't come forward with a plan yet because they wanted to use every opportunity to tweak/improve the plan before presenting it to the creditors. Delta probably thought they would receive a few more time extensions, but now with a competing US plan in the mix, Delta will probably lose any motions for an extension beyond the February 15th exclusivity deadline.

Delta can always get DIP financiers because DIP financiers are given a priority preference in bankruptcy (meaning they will likely be paid in full upon any default or insolvency post discharge). But like I stated earlier, it will be insufficient as compared to the US plan. Although Delta will get DIP financing, the financiers will only give as much money as necessary to allow the airline to run. They likely will not give Delta enough money to pay a significant amount of cash to the unsecured creditors.

So what will the unsecured creditors get under the Delta plan? Usually, in plans such of these, the unsecured creditors will receive shares of the newly restructured company. In bankruptcy, this is usually seen as less attractive as compared to receiving cash. As “Former ModerAAtorâ€￾ mentioned earlier, “long terms relationships don't mean squat in bankruptcy." The unsecured creditors typically would rather receive the cash now than have to bet on whether a previously unsuccessful company will now be successful. Plus, if the unsecured creditor is given cash, they usually still have the opportunity to invest in the company at a later time. (Obviously, the option of cash is not available to those given shares under the POR).

So, why is Delta's plan inferior to US's? While Delta is, in essence, only offering it's unsecured creditors shares, US is offering the unsecured creditors a mix of cash and shares (a plan that usually appeases unsecured creditors).

 

[flyhigh]

Abe,

Quick note on the US Airbus relationship. While a requirement to purchase the 350 was part of Airbus' investment in HP to buy US, that may have disolved. I don't think it has been officially announced as such, but there was a clause that was announced regarding the timing of 350 availability. If it was delayed for a specified amount of time, US could back out.

As for some of your points re: overlap, that's most of the reason US went after Delta instead of NW. In a memo to US employees, Doug Parker and their CFO announced that DL was more attractive because of the lack of progress in shedding costs vs that of NW and the overlap provides an opportunity to sell assets as part of the takeover thus helping a) appease regulators & b)pay the debt brought on by the merger. The Shuttle is an obvious overlap that won't be tollerated. There's obviously a couple competitors interested in that asset (AA has at least once before attempted to purchase this asset). As for the overlap of ATL & CLT. It's interesting. I think regulators would at least require some gates to be given (or sold) to other carriers who want them (Airtran being an obvious interested party). US could make an arguement that for a long time, they operated hubs in PIT & PHL which I believe was the result of purchasing other carriers...why is this different especially when you have a capable competitor in ATL such as Airtran??? I think they would jetison CLT because ATL is a better revenue generator.

In the end, I think this deal will die, but not because of DL creditors, but more by the East Coast US people who will promise to creat havoc because they will benefit the least (losing CLT...US is promising DL people in ATL jobs...let the fights begin).

With WN & FL already lining up to say they are interested in overlapping assets and a likely bid from AA for the shuttle as well as likely interest from others for many other assets...I don't think we can yet say this is dead. Its likely that US will have to get Boeing on board for this to happen. Coke wants money...they'll fly whoever they can to get from A to B. The Delta fleet has many renewal requirements coming up. The M80 & 767 fleets are getting long in the tooth. In the next 5-10 years something will need to happen with them. It would be worth Boeing's time to listen to an opportunity to become the supplier of that fleet. Not only is Delta's fleet requirement large, but it would take Airbus out of an entire portfolio (US's current supplier). We're in the 2nd inning of a long game. You probably haven't heard the last of US on this bid. You don't line up a plan like this to give up so early. You don't get Citibank to loan you this much money to say you're giving up. They don't want to hear that. Citi wants to make money on that loan.

 

[BoeingBoy]

I keep seeing references to creditors as though they are some monolithic block (well, two blocks - secured/unsecured). Nothing could be further from the truth.

In each of the US bankruptcy cases, as well as the UA case, there were multiple classes of creditors having claims to multiple debtors. For example, in the 2nd US case there were 5 deptors with each having from 8-11 classes of creditors.

Some classes were "unimpaired" or secured - they were going to be paid in full. Some didn't have their status as "impaired" or "unimpaired"determined till after the POR was filed. Some were "impaired" but were going to get some mixture - cash, cash and stock, or only stock. And some were "impaired" and would get nothing.

The same will be true no matter whether the POR presented is DL's "stand alone" plan or US' merger plan - the "unsecured" creditors will receive different treatment depending on what class they're in. Some will end up getting paid in full, some will get money but not the full amount of their claim. Some will get only a combination of stock and money. Some will get only stock. And some will get nothing - their claims will end up being thrown out.

Heck, US has been out of BK for over a year and they're still fighting in BK court over what and how much some of the creditors will get. So saying that the unsecured creditors will be swayed because they'll get some cash instead of only stock is vastly oversimplified and misleading.

A couple of examples of the uncertainty surrounding classifying creditors at this point:

Boeing - from what I've read, the vast majority of their multi-Billion claim is presently unsecured (orders for future aircraft deliveries, thus no collateral). If DL's POR affirms those orders and makes Boeing whole (progress payments, etc), that unsecured multi-Billion claim could become secured and Boeing could end up not even having a vote - BK law presumes "unimpaired" creditors are in favor of the debtor's POR.

Coke - like Boeing, their claim is primarily based on the future value of their contract with DL, hence no collateral. If DL affirms that contract in it's POR, Coke's claim could become "unimpaired" and they too could get no vote - automatically presumed to be in favor of DL's POR.

What will ultimately happen? Beats me. The only thing I know is that it's not nearly as simple as some people make it sound.

Jim

 

[Twicebaked]

Well THIS F/A IS For It! Speak For Yourself!! :blink:

So is this one. Don't speak for the f/a s!!

 

[flyhigh]

BoeingBoy,

Question...given that nobody has really come out of bankruptcy ordering scores of new aircraft, what is the chance DL will? If they do, but US were to guarantee a larger portion of that order book DL has (since it's likely DL won't fulfill the entire $3.7 billion in orders) wouldn't Boeing be compelled to vote in favor of US's plan. Additionally, a bigger creditor than Coca-Cola is Bank of New York. The list of the Top 20 unsecurred creditors on the ch 11 filing listed Boeing's $3.7b then 19 separate claims by BoNY totaling more than Boeing's claim. Given that, there's little DL can do to satisfy them like they can Boeing & Coke (agree to fulfill those contracts...which is unlikely to begin with). It would seem BoNY would be more compelled to go with US.

I guess overall, I'm asking why these creditors couldn't be compelled to go with US as easily as DL when DL is unlikely to fulfill or make whole the amount owed these creditors. It seems that it would be more likely that US (as the new Delta) could fulfill a greater portion of these claims...

 

[Gilding the Lily]

I keep seeing references to creditors as though they are some monolithic block (well, two blocks - secured/unsecured). Nothing could be further from the truth.

Although, I make an attempt to distinguish between the two in my posts, I understand that others do not. Unless noted otherwise, you should assume that they are speaking of unsecured creditors because the secured creditors do not have much of a say when it comes to accepting a plan (they are presumed to accept the plan if they are unimpaired).

In each of the US bankruptcy cases, as well as the UA case, there were multiple classes of creditors having claims to multiple debtors. For example, in the 2nd US case there were 5 deptors with each having from 8-11 classes of creditors.

Yes, each secured creditor is usually in their own class, while the unsecured creditors are usually lumped together into a very large class (notwithstanding preferences). If a creditor is both secured and unsecured; their claims are usually spilt into two classes.

Some classes were "unimpaired" or secured - they were going to be paid in full. Some didn't have their status as "impaired" or "unimpaired"determined till after the POR was filed. Some were "impaired" but were going to get some mixture - cash, cash and stock, or only stock. And some were "impaired" and would get nothing.

Yes, seems lately that claims regarding pensions are often swept aside.

The same will be true no matter whether the POR presented is DL's "stand alone" plan or US' merger plan - the "unsecured" creditors will receive different treatment depending on what class they're in. Some will end up getting paid in full, some will get money but not the full amount of their claim. Some will get only a combination of stock and money. Some will get only stock. And some will get nothing - their claims will end up being thrown out.

But, obviously, the unsecured creditors may be treated better under one plan as compared to the other.

Heck, US has been out of BK for over a year and they're still fighting in BK court over what and how much some of the creditors will get. So saying that the unsecured creditors will be swayed because they'll get some cash instead of only stock is vastly oversimplified and misleading.

Usually, this is done when the trustee (debtor) decides to accept pre-bankruptcy contracts and now they have disputes about the contracts post-bankruptcy. This may potentially go on for years (Kmart is still doing this). I do not suggest that the unsecured creditors will ultimately be swayed by the cash. I am simply pointing out that in these scenarios, the competing plan usually has more financing lined up and can typically offer more cash to the unsecured creditors. And historically, creditors are often wooed by the extra cash as compared to receiving shares and little or no cash. (Feel free to research Chp. 11 bankruptcies when competing plans are filed). Obviously, only idiots from another company would waste a significant amount of money by offering a competing plan that is inferior to a plan filed by the debtor. Thus, we can probably assume that the US plan is able to offer more cash to the creditors than Delta.


What will ultimately happen? Beats me. The only thing I know is that it's not nearly as simple as some people make it sound.

Yep... not nearly as simple as you or I or anyone else can explain. Guess we will find out around February 15th?!?!