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Delta Air Lines exits bankruptcy leaner than when it entered 19 1/2 months ago

Delta Air Lines exits bankruptcy leaner than when it entered 19 1/2 months ago

Delta Air Lines Inc. emerged from bankruptcy protection Monday as an independent carrier after surviving a hostile takeover bid during a 19 1/2-month reorganization that saw it eliminate jobs, cut costs, restructure its fleet and focus more on international flying.
A U.S. Bankruptcy Court judge in New York had set 9 a.m. EDT (1300 GMT) as the time the Atlanta-based airline could exit from Chapter 11 by closing on a $2.5 billion (euro1.84 billion) loan that would allow it to pay back lenders who gave Delta money to help it operate while in bankruptcy.
Delta's chief bankruptcy lawyer, Marshall Huebner, said in a 10:21 a.m. e-mail to The Associated Press that the wire transfers for the loans were completed.
Delta, the third-largest U.S. carrier, also unveiled Monday details of a marketing plan that includes a new paint job for its planes, featuring the company's three-dimensional red logo flying across a blue background. The new brand will appear on more than 900 planes, at airports and on Delta advertising.
"This is an amazing day for an extraordinary company, which has reclaimed its heritage and has emerged from Chapter 11 as a fierce, determined and well-capitalized competitor," Huebner said.
Delta has set aside $10 million (euro7.3 million) for its rebranding effort, which could also include a new advertising campaign.
Now that Delta is out of bankruptcy, executives at Delta will consider shedding Comair, a Delta subsidiary that provides regional service for the airline.
Comair also emerged from bankruptcy on Monday after nearly two years of restructuring in which the regional airline cut jobs and other costs.
Delta's outgoing chief executive, Gerald Grinstein, said last week he did not expect any "immediate action" on Erlanger, Kentucky-based Comair since Delta has a new board of directors. Even so, some analysts expect Delta to make a quick decision.
Delta's board also will be looking for a new CEO to replace Grinstein, 74, who has said he plans to step down once his successor is appointed.
Delta entered Chapter 11 on Sept. 14, 2005, amid high fuel prices and the burdens of high labor and pension expenses. Delta significantly reduced its labor and pension costs while under court protection. As of March 31, the company had 52,260 full-time employees, according to a regulatory filing Friday. The figure includes subsidiary Comair.
The bankruptcy process has been expensive for Delta, which has run up more than $127.9 million (euro94 million) in bills for fees and expenses for its lawyers, consultants and advisers through the end of January. It could spend tens of millions more once the final fee and expense requests are dealt with.
Delta underwent a lot of changes while in bankruptcy, which, along with cost cuts, included improving aircraft cabins and expanding international service.
The carrier also defeated a hostile takeover bid by Tempe, Arizona-based US Airways Group Inc. US Airways withdrew its $9.8 billion (euro7.2 billion) bid after Delta's unsecured creditors committee in January endorsed Delta's reorganization plan.
Delta's existing stock was canceled Monday. Shares of new stock will be issued to creditors and begin trading publicly on the New York Stock Exchange on Thursday. That day, Delta executives will ring the closing bell from the floor of the NYSE.
The company says 400 million shares will be issued, putting the target initial public offering at $23.50 (euro17.27) a share to $30 (euro22.05) a share based on Delta's projected valuation of $9.4 billion (euro6.91 billion) to $12 billion (euro8.82 billion).
Delta's reorganization plan gives unsecured creditors between 62 percent and 78 percent of the value of their allowed claims as shares of new Delta stock. Delta employees also will get a lump-sum cash payment from the airline based on a percentage of their salary and will receive an equity stake in the reorganized company. Checks to employees are to be issued Tuesday.
More than 95 percent of creditors voted to endorse the plan for Delta to leave bankruptcy, and a federal bankruptcy judge in New York on April 25 gave the airline the green light to exit Chapter 11 on Monday. Conditions included closing on the $2.5 billion (euro1.84 billion) loan that was used to repay another loan that helped fund the airline's operations while in bankruptcy.
Chapter 11 bankruptcy frees a company from the threat of creditors' lawsuits while it reorganizes its finances. The debtor usually retains control of the business and its assets.
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On the Net:
http://www.delta.com


Updated : 2021-04-19 14:54 GMT+08:00