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Los Angeles objects to disclosure statement to Delta reorganization plan

Los Angeles objects to disclosure statement to Delta reorganization plan

The city of Los Angeles said in a bankruptcy court filing Thursday that Delta Air Lines Inc.'s reorganization plan cannot be approved because of undue authority it gives the company to reject certain leases.
The city made the comments in an objection to the disclosure statement to Delta's reorganization plan. Thursday was the objection deadline.
If the disclosure statement, which details Delta's operations, is approved after a hearing currently scheduled for Feb. 7, the Atlanta-based company would be permitted to begin soliciting votes to approve its reorganization plan calling for it to emerge from bankruptcy as a standalone carrier.
The city of Los Angeles said that Delta's disclosure statement is accompanied by a reorganization plan that is "not confirmable as a matter of law and, thus, should not be approved because proceeding with a solicitation of the plan in its present form would waste valuable judicial and estate resources."
The city owns Los Angeles International Airport and Ontario (California) International Airport, where Delta conducts operations and maintains leases.
The city said in its filing that Delta's disclosure statement fails to describe the potential impact that termination of its Terminal 5 lease at Los Angeles International Airport would have on the company's operations and financial performance. The filing said that the city is seeking, subject to court approval, to terminate the lease.
Without the information, creditors like the city of Los Angeles cannot accurately evaluate the feasibility of Delta's reorganization plan, the objection says.
The city also said that Delta's reorganization plan improperly gives Delta broad discretion to defer the effectiveness of its decisions to assume or reject certain unexpired leases and contracts beyond the effective date of the plan.
Delta spokesman Michael Freitag described the objection as a "classic issue that comes up in every Chapter 11 (bankruptcy) case."
"Are they objecting to the reorganization plan and disguising it as an objection to the disclosure statement?" Freitag said. "That's an issue that the lawyers will have to address at the hearing."
Only the disclosure statement is at issue currently. A separate hearing would be held to approve the reorganization plan.
Delta first filed its reorganization plan and disclosure statement on Dec. 19, and then amended it on Jan. 19.
Delta has estimated the company will be worth $9.4 billion (euro7.24 billion) to $12 billion (euro9.25 billion) if it emerges from Chapter 11 by the middle of the year as a standalone company, which is its goal.
Tempe, Arizona-based US Airways Group Inc., which continues to push a hostile bid to buy Delta, has asked Delta's official creditors committee to support postponing the Feb. 7 bankruptcy hearing. It has said that if that condition is not met by Feb. 1, along with several other conditions, it will withdraw its bid for Delta. Delta's official creditors committee has so far been silent about their position on US Airways' revised offer.
Chapter 11 bankruptcy frees a company from the threat of creditors' lawsuits while it reorganizes its finances.


Updated : 2021-02-27 21:24 GMT+08:00