Delta Seeks Repricing

Delta Airlines is looking to amend several aspects of its $1.9 billion debtor-in-possession loan to reduce the interest rate on the three term loans and complete amendments to other outstanding financial commitments.

  • 17 Mar 2006
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Delta Airlines is looking to amend several aspects of its $1.9 billion debtor-in-possession loan to reduce the interest rate on the three term loans and complete amendments to other outstanding financial commitments. GE Capital is leading the amendment process.

The credit consists of a $600 million term loan "A" priced at LIBOR plus 4 1/2%; a $700 million term loan "B" at LIBOR plus 6 1/2% and a $600 million term loan "C" priced at LIBOR plus 9%. Delta is looking to reduce pricing by 175 basis points on all three tranches, lowering the term loan "A" to LIBOR plus 2 3/4%; the term loan "B" to LIBOR plus 4 3/4% and the term loan "C" to LIBOR plus 7 1/2%. GE led the initial deal and Morgan Stanley is a co-arranger on the airlines' term loan "C."

Delta is also seeking to amend the term loan "A" to add a $200 million cash collateralized letter of credit subfacility to the tranche. "It's a smart move for them," one investor familiar with the airline industry said. "They have a lot of issues they need to address and if they can pay lower interest rates, it has to help them." Delta's myriad of problems include dealing with its unions, managing the rising cost of airline fuel and finding ways to compete with discount airlines.

Additional changes will include amending a GE Capital Aviation Services facility to allow for additional liens on non-DIP credit facility collateral and allow fuel hedging to be secured by cash deposits, as long as the deposits don't exceed either $300 million or 15% of outstanding unrestricted cash.

Standard & Poor's and Moody's Investors Service assigned BB/Baa3 ratings to the "A" loan, B+/Ba3 to the "B" loan and B/B3 to the "C" tranche, back in September when syndication of the DIP was first launched. Based in Atlanta, Delta is the fourth largest airline in the world by revenue, behind Air France-KML Cargo, American Airlines and United Airlines. On Sept. 14 Delta filed for reorganization under Chapter 11 bankruptcy. Calls to Morgan Stanley were not returned. A banker at GE and a spokesman at Delta declined to comment.

  • 17 Mar 2006

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