US Airways withdraws Delta merger offer amid lack of Delta creditors' committee support

By Caroline Salls

Pittsburgh, Jan. 31 - US Airways Group, Inc. withdrew its offer to merge with Delta Air Lines Inc. after US Airways was informed that Delta's official committee of unsecured creditors would not meet its demands by the Feb. 1 deadline, according to a US Airways news release.

US Airways said its offer of $5 billion in cash and 89.5 million shares of US Airways stock would have expired on Feb. 1 unless it received affirmative support from the official committee of unsecured creditors for US Airways to begin due diligence, to make the required filings under Hart-Scott-Rodino and for the postponement of Delta's hearing on its disclosure statement, which is scheduled for Feb. 7.

Delta's official committee of unsecured creditors said in a news release that it has decided to support the company's standalone plan of reorganization as finally agreed upon between Delta and the committee, with a revised plan to be filed later this week.

The committee said it reached this decision after extensive discussions with representatives of Delta and US Airways over the last two months and upon consideration of the advice of the committee's legal, financial and industry advisers.

In reaching this decision, the committee said it considered a variety of factors, including the valuation of, the timing of and the risks associated with the US Airways proposal and the likelihood of a successful consummation of the proposal.

The committee said it intends to work with Delta toward confirmation and consummation of the plan of reorganization.

"We are disappointed that the committee, which has been chosen to act on behalf of all Delta creditors, is ignoring its fiduciary obligation to those creditors," US Airways chairman and chief executive officer Doug Parker said in the release.

"Our proposal would have provided substantially more value to Delta's unsecured creditors than the Delta standalone plan.

"The publicly traded bonds of Delta have fallen precipitously since rumors of this committee decision were leaked last week, reducing the implied market valuation of what Delta's unsecured creditors can expect to recover in these cases by over $1.5 billion.

"We empathize with the investors who purchased Delta bonds at increasingly higher prices since our offer was announced last November."

In a Delta news release, chief executive officer Gerald Grinstein said, "This is a proud day for the thousands of Delta people, customers, communities, civic leaders and others who stood up for our standalone plan and said, emphatically, 'Keep Delta My Delta.'

"We appreciate the unsecured creditors committee's endorsement of our plan of reorganization and the diligent work of the committee and its advisers in evaluating that plan.

"Using the bankruptcy process the right way, Delta people have transformed their company's business model. Our focus now is on the work still before us to emerge from Chapter 11 this spring as a strong, healthy and vibrant global competitor."

Delta, an Atlanta-based airline, filed for bankruptcy on Sept. 14, 2005 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 05-17923.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.