CHICAGO — A federal bankruptcy court judge yesterday approved Atlanta-based Delta Air Lines Inc.’s reorganization plan, clearing the airline’s path to emerge on Monday from Chapter 11 bankruptcy after nearly 20 months.
The new company — which will trade on the New York Stock Exchange under the ticker symbol of DAL — estimates its worth between $9.4 billion and $12 billion following its elimination of 6,000 jobs in an effort to reduce costs by $3 billion. The reorganization plans calls for unsecured creditors to receive a payout of between 62 and 78 cents on the dollar of their claims in the company’s new stock.
The airline’s plan was approved by Judge Adlai S. Hardin, who presides in the U.S. Bankruptcy Court for the Southern District of New York, after receiving the support of more than 95% of creditors who rejected the overtures of a rival takeover bid from US Airways Group.
“This is an exciting day for everyone at Delta,” Gerald Grinstein, Delta’s chief executive officer, said in a statement. “Achieving a turnaround of this magnitude in little more than 19 months would not have been possible without the hard work and dedication of Delta people worldwide, and the leadership, the vision, and the flawless execution of our plan by our outstanding management team.”
Delta’s plan calls for it to shed about $1.2 billion of its special facilities revenue bond debt. The airline entered bankruptcy in September 2005 with $1.8 billion of tax-exempt municipal debt and will emerge with $558 million.
The airline entered bankruptcy with outstanding bonds issued for projects at airports in Atlanta, Boston, Chicago, Cincinnati, Dallas, Los Angeles, New York City, Portland, Salt Lake City, San Francisco, and Tampa. The disclosure statement appears to contain information on most of its issues at airports with the exception of Salt Lake City and San Francisco.
The airline will continue paying on bonds issued for projects at Chicago’s O’Hare International Airport, Los Angeles International Airport, New York City’s LaGuardia Airport, and some portion of debt issued for projects at Atlanta’s Hartsfield-Jackson Airport.
If the airline accomplishes its goal, it will have shed $1.2 billion of debt, at an annual savings of $120 million. However, the airline remains in dispute with trustees and bondholders on some of its tax-exempt issues.
Hardin has yet to rule on a settlement between the airline and trustee UMB Bank NA on $414 million of the airline’s outstanding tax-exempt debt issued by the Kenton County, Ky., Airport Board for projects at the Cincinnati/Northern Kentucky International Airport. A small group of bondholders are fighting the settlement.
The airline successfully eliminated repayment of $498 million of bonds sold through the Massachusetts Port Authority for its new terminal at Boston Logan International Airport.
