Was DL's financial projections accurate?

[Gilding the Lily]

DL applied to the Bankruptcy Court today to employ and retain Huron Consulting. Under the agreement between DL and Huron, the services will include: Fresh-Start reporting, valuation consulting, and most importantly, adjustments to the financial projections and disclosures.

This type of situation in bankruptcy is common and should not raise much concern. However, you should be aware that DL's financial projections and disclosure statements will likely change. Once DL employs Huron, it will review the financial projections and adjust the projections and disclosure statement to more accurately reflect the value of DL. This will be a factor in determining whether DL was overly optimistic in its original valuation.

 

[Smitty]

DL applied to the Bankruptcy Court today to employ and retain Huron Consulting. Under the agreement between DL and Huron, the services will include: Fresh-Start reporting, valuation consulting, and most importantly, adjustments to the financial projections and disclosures.

This type of situation in bankruptcy is common and should not raise much concern. However, you should be aware that DL's financial projections and disclosure statements will likely change. Once DL employs Huron, it will review the financial projections and adjust the projections and disclosure statement to more accurately reflect the value of DL. This will be a factor in determining whether DL was overly optimistic in its original valuation.

seems like a big waste of money. arnt they payin blackstone for the exact same thing?

 

[eckoa6]

seems like a big waste of money. arnt they payin blackstone for the exact same thing?

It would seem that way but with many in the industry questioning the validity of the current valuation from blackstone and delta, it would seem very resonable for delta to have another outside party reaffirm the original valuation or scenario number 2 is that some of the creditors are requesting delta to have another outside firm review the situation to make sure that they are getting the best deal. It seems very probable to me that if scenario number 2 is the case in combination with the creditors bringing in Bethune that there looking very seriously at the US Delta combo.

 

[Flufdriver]

It would seem that way but with many in the industry questioning the validity of the current valuation from blackstone and delta, it would seem very resonable for delta to have another outside party reaffirm the original valuation or scenario number 2 is that some of the creditors are requesting delta to have another outside firm review the situation to make sure that they are getting the best deal. It seems very probable to me that if scenario number 2 is the case in combination with the creditors bringing in Bethune that there looking very seriously at the US Delta combo.

Come on GERRY, open your books for Doug or are you and your country club buds hiding something? Like how you over inflated the value of DAL. If your numbers are correct Gerry, open the books with open arms then we will all know your a straight shooter.

The process of "Making Delta, Our Delta"

 

[AtlanticBeach]

The great thing about business valuation is that it provides employment for erstwhile fiction writers. Based on items one wishes to ignore or inflate, the value can be whatever someone wants it to be.

The $8.5B number placed on DL by Parker appears quite excessive and the $12B by Grinstein defies all logic. That being said, Huron's first question to Gerry will probably be, "What number do you want us to find?" I'm not a cynic in this case, just a realist.

What is interesting about valuation is that the consultants will use whatever system gets the highest, not necessarily the most accurate number. Consider the high valuations placed on many internet companies based on eyeballs, not income. The reverse is true for airlines; the total value of hard assets (often replacement value, not depreciated value) is listed with no consideration of probable profit from these assets. If an income or profit valuation were to be applied to Delta, it would probably be in the $3B to $5B range.

 

[RowUnderDCA]

I deal with real estate appraisals. I can report rediculous conclusions accepted by land owners with just a shred of support from an appraisal (if you don't read the whole document). Often it is the client accepting the valuation method they prefer to get them the desired value.

 

[AtlanticBeach]

I deal with real estate appraisals. I can report rediculous conclusions accepted by land owners with just a shred of support from an appraisal (if you don't read the whole document). Often it is the client accepting the valuation method they prefer to get them the desired value.

Interesting analogy. Much of the recent run-up in housing pricing has been as a result of the Greater Fool Theory. The Theory has been part of the aviation industry since Steve Wolf put lipstick on his first pig.

 

[luv2fly]

Come on GERRY, open your books for Doug or are you and your country club buds hiding something? Like how you over inflated the value of DAL. If your numbers are correct Gerry, open the books with open arms then we will all know your a straight shooter.

The process of "Making Delta, Our Delta"

Why would you open up your books prematurely to your biggest competitor? The creditors are privy to DL's financial information. There is no need to open anything to US Airways. At this point, it is none of their business as DL is the only party with the exclusive right to reorganize. If the creditors truly want to open the books they will demand that it be done. Until that point I would expect DL to continue telling Doug to pound sand.
I would also speculate that if the creditors committee calls for due diligence, it will scrutinize the US plan as well, as there is just as much uncertainty in exactly how Parker came up with his proposed synergies.
It is quite possible they could conclude that Doug's plan is far more of a fallacy.