Delta Lays Out Bankruptcy Financing

Airline has won interim approval to utilize up to $1.4 billion of its $1.7 billion in debtor-in-possession financing.
Stephen TaubSeptember 19, 2005

Delta Air Lines Inc. announced that it has received a little more than $2 billion in post-petition financing commitments, including $1.7 billion in debtor-in-possession financing committed by GE Commercial Finance and Morgan Stanley.

On Friday, Judge Prudence C. Beatty granted interim approval to Delta’s request to utilize up to $1.4 billion of the $1.7 billion. The court also granted interim authority for Delta to use $350 million of secured post-petition financing that American Express has agreed to provide. Amex’s funding replaces a $500 million advance payment the company had made for SkyMiles, according to The Daily Deal.

“We are very pleased to have passed this first critical milestone in our Chapter 11 proceedings,” said chief financial officer Edward Bastian, in a statement. “With this increased liquidity and the court’s interim approval of the key first-day motions, Delta will maintain normal business operations as we continue to transform our airline during the reorganization proceedings.”

According to The Daily Deal, Delta will use the financing to retire its prepetition loans and pay fees and expenses. The rest of the $1.4 billion will reportedly be used for working capital.

Bastian reportedly stated in bankruptcy court that the company has $550 million of cash on hand but would have only $110 million at the end of October without debtor-in-possession financing, given that its payroll alone is $400 million per month. The financing would be enough for Delta to “get in, through, and out” of Chapter 11, added the publication, citing debtor counsel Marshall S. Huebner of Davis, Polk & Wardwell.

Meanwhile, later this week Delta will inform its employees about plans for cuts in pay and benefits, according to Reuters, citing Delta chief executive officer Gerald Grinstein’s testimony before the Georgia’s Senate Finance Committee.