US Airways adds Morgan Stanley as a lead on $7.15 billion debt financing for Delta bid

By Sara Rosenberg

New York, Jan. 8 - US Airways Group Inc. has added Morgan Stanley as a joint lead arranger on its proposed $5.5 billion term loan and $1.65 billion bridge facility that would be used to help back its bid for a merger with Delta Air Lines Inc., according to a company new release.

Citigroup is the other lead bank on the deal and was the sole provider of the debt commitment originally.

The new financing commitment, updated to include Morgan Stanley, has also been revised to provide significantly improved financial terms, the release added.

Under the buyout proposal, Delta creditors would receive $4 billion in cash and 78.5 million shares of US Airways stock with a total value of about $4 billion based on the closing price of the stock as of Nov. 14.

In addition to funding the proposed merger, the $7.15 billion of debt would refinance Delta's $1.9 billion debtor-in-possession financing facility and US Airways' $1.25 billion term loan.

The proposed merger is targeted to close in the first half of 2007, consistent with Delta's plan to emerge from Chapter 11. The companies still have to begin due diligence, enter into a merger agreement, file Hart-Scott-Rodino clearance with the Department of Justice, file a plan of reorganization with the U.S. Bankruptcy Court, obtain Delta creditor approval, receive US Airways shareholder approval and Delta has to emerge from bankruptcy.

Tempe, Ariz.-based US Airways said that it expects the combination will generate at least $1.65 billion in annual synergies, including $935 million in network synergies and $710 million in net cost synergies.

US Airways first sent a letter to Delta on Sept. 29, 2006 proposing the merger of the two companies, but Delta's response to the proposal was basically to decline any sort of meeting.

As a result of Delta's stand-offish behavior, US Airways decided to take its proposal to the public so that Delta's creditors could have a chance to evaluate the transaction, claiming that the combination of the companies presents a significantly greater value for Delta's creditors, customers, employees and partners than a plan by Delta to emerge from bankruptcy on a standalone basis.

In December, Delta filed a standalone plan of reorganization and announced that its board of directors unanimously voted to reject US Airways' unsolicited merger proposal.

The combination of US Airways and Atlanta-based Delta would create one of the world's largest airlines and would operate under the Delta name.

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