Delta Lands Financing from Amex

The airline reportedly could still end filing for bankruptcy protection by the end of the week, however.
Stephen TaubOctober 26, 2004

Desperately trying to stave off bankruptcy, Delta Air Lines state that it has received $600 million in financing from American Express Travel Related Services Co., Inc.

The financing includes $500 million will be in the form of a prepayment of SkyMiles, and made in two installments, according to Delta. The first installment would be paid upon timely satisfaction of certain conditions, and the second installment would be paid at least 90 days after the initial prepayment installment, the company stated.

The embattled airline will also receive up to $100 million from a new credit facility Amex is currently negotiating with other lenders, it said. Amex hasn’t yet obtained a commitment yet from the other lenders, however.

Both the prepayment and the credit facility would be fully collateralized by a pool of assets, according to Delta.

“As our September quarter 2004 losses demonstrate, time is now very critical for Delta,” said Gerald Grinstein, Delta’s chief executive officer, in a statement announcing the Amex deal. “American Express’ role in Delta’s transformation process demonstrates the commitment and determination of one of our key stakeholders in helping to restructure the company.”

News of the financing deal and reports that a pact with the pilots is close sent Delta’s stock up more than 20 percent on Monday.

Meanwhile, Delta continues to negotiate with its pilots. The airline is seeking more than $1 billion in concessions, according to the Associated Press.

If the two sides fail to work out a deal, the airline could file for bankruptcy by the end of the week, according to a number of media reports.

“We believe that there will be a pilot agreement and that bankruptcy will be avoided for the time being,” Calyon Securities analyst Ray Neidl wrote in a research note, according to Reuters.