Delta Rejects US Airways' Bid, Woos Creditors

Delta Air Lines filed a reorganization plan with the bankruptcy court Tuesday that calls for it to emerge from Chapter 11 in the spring of 2007 as a standalone company. It also said that its board has formally rejected US Airways' $8.4 billion hostile bid to buy Delta and create the nation's largest airline.

CNBC's Phil LeBeau says Delta focused today on convincing its creditors they will be better off if Delta remains independent, "What we are essentially entering here is a period over the next two to three months where the creditors will be wooed, for lack of a better term."

The Atlanta-based carrier outlined a five-year business plan, and said that its advisers have determined that a reorganized Delta will have a consolidated equity value of roughly $9.4 billion to $12 billion. It said the plan would result in a recovery by Delta's unsecured creditors of roughly 63% to 80% of their allowed claims.

Delta's existing stock would be wiped out under the plan and creditors generally will receive distributions of new Delta common stock to settle their claims.

Delta also said Tuesday that its board has unanimously rejected US Airways' unsolicited offer, which was first disclosed Nov. 15.

"The board concluded that Delta's standalone plan will provide the company's creditors with superior value and greater certainty on a much faster timetable than the US Airways proposal," Delta said in a statement.

There was no immediate comment by Tempe, Ariz.-based US Airways, but an official with knowledge of that company's plans who spoke on condition of anonymity because of the sensitivity of the talks said Monday that US Airways was willing to increase its offer if Delta could justify it is worth more.

But Delta said Tuesday that as far as it is concerned it believes flying solo is the best proposal for everyone involved.

Ultimately, it will be the unsecured creditors committee in the bankruptcy case that will play the decisive role. The committee has not said whether it will support Delta's plan, US Airways' plan or any other offer to buy Delta that may come in.

Delta said US Airways continues to experience significant integration problems its prior, smaller deal with America West. It believes US Airways is not equipped to simultaneously integrate a substantially larger company like Delta.

Delta said its business plan projects, among other things, a 50% reduction in net long-term debt and a return to profitability in 2007 and an increase in net income, after profit-sharing, from roughly $500 million next year to roughly $1.2 billion in 2010.

Delta filed for Chapter 11 in New York in September 2005.