Delta Gets $2.5 Billion in Financing To Help Exit Bankruptcy

Delta Air Linessaid it has commitments from six major banks for $2.5 billion in exit financing as it aims to emerge from bankruptcy protection independently.

The exit financing is a major step forward in Delta's bankruptcy process and signals its determination to emerge as a stand-alone airline in the face of an unwanted $9.8 billion
takeover bid from rival US Airways Group.

US Airways has set a Feb. 1 deadline for support from Delta's main creditor committee, which has so far not publicly announced its intentions.

"We've given the creditors committee until February 1 to let us know if they're willing to give us some affirmitive support for our bid...just to ask the Delta management to allow us to do some things like due diligence," Douglas Parker, US Airways' chief executive officer, told CNBC.
"If they don't want to do that, our bid is off."

The financing deal could be seen as a symbolic seal of approval for Delta's plan from Wall Street's blue-chip lenders.

"These banks have looked at the stand-alone business plan that Delta has come up with and this is their giving credibility to it," said Fruman Jacobson, a lawyer at Sonnenschein Nath & Rosenthal, which represented unsecured creditors in the bankruptcy of UAL, parent of
United Airlines.

Six Major Banks

The financing will be co-led by JPMorgan Chase, Goldman Sachs Group, Merrill Lynch, Lehman Brothers Holdings, Swiss bank UBS, and Barclays Capital, the investment banking unit of British bank Barclays.

US Airways has Citigroup and Morgan Stanley backing its bid.

Delta's arrangement replaces the $2.1 billion in financing it took on while in bankruptcy. The money will also be used to make payments required upon exit from bankruptcy, such as
paying advisers, and to increase the company's cash balance.

Atlanta-based Delta, which has been operating under bankruptcy protection since September 2005, has said it wants to emerge from bankruptcy this spring.

"The competitive terms and unique structure of this financing package reflect our considerable progress and the soundness of Delta's stand-alone plan," Delta Chief Financial
Officer Edward Bastian said in a statement.

"We appreciate the confidence the financial markets are showing by making this commitment in support of Delta's stand-alone plan."

Unsecured Creditors

Meanwhile, an unofficial committee of unsecured Delta creditors urged the official creditors committee to consider the improved proposal by US Airways to merge with Delta.

In a statement, the committee, which described itself as the largest group of unsecured creditors of Delta, said creditors should have a chance to decide whether to pursue a stand-alone reorganization or a viable alternative.

"The US Airways bid is a viable alternative that should be explored," the committee said.

The committee said Delta's management should provide access to US Airways to perform due diligence and agree to a 30-day continuance of the disclosure statement hearing.

The committee is represented by Jefferies as its financial adviser and Paul, Weiss, Rifkind, Wharton & Garrison as its legal adviser.

Atlanta-based Delta rejected a Nov. 15 takeover offer from US Airways , but the rival pushed ahead with its bid and raised its offer by about 20% earlier this month.

Delta, the No. 3 U.S. carrier, has said its management and advisers were studying the increased bid, but it reiterated that it wanted to exit Chapter 11 independently.

In addition, Delta assures creditors that it won't rule out merging with another airline after exiting from bankruptcy if the US Airways takeover bid is defeated, The Wall Street Journal reported.

On Tuesday, US Airways reported that it achieved a profit in the fourth quarter, thanks to passenger growth, lower fuel costs and higher fares.