Delta to make offering of new debt with later maturity

 
Old Sep 16, 09, 2:17 pm
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Delta to make offering of new debt with later maturity

Trying to get improve cash flow by paying off some current obligations with new debt maturing in the future. At least Delta's in a better cash position currently than most of the legacy airlines.

Not sure that one analyst's firm's position is that airlines are turning the corner financially is accurate. It's going to be a long, cold winter.


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Old Sep 16, 09, 2:39 pm
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Interesting to note that the offerings will be secured by "Delta's Pacific route authorities, slots and gate leaseholds. Those assets will also constitute the collateral for the company's new senior secured credit facilities, Delta said."

Thanks, NWA!
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Old Sep 16, 09, 2:43 pm
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Originally Posted by TheMoose View Post
Interesting to note that the offerings will be secured by "Delta's Pacific route authorities, slots and gate leaseholds. Those assets will also constitute the collateral for the company's new senior secured credit facilities, Delta said."

Thanks, NWA!
The pacific routes can't be worth much. Remember, DL took over NW because NW was hurting so much, and begged DL to take them over. That is what I read here on the forum, anyway.
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Old Sep 16, 09, 2:44 pm
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Sounds like a routine transaction that most businesses would want to make under the circumstances: Debt comes due, debt rolled over into new loans. The actual amounts, credit ratings & interest rates would have been interesting, but the article was pretty superficial & didn't dig into that.

More interesting is what kind of investor would take a chance on a company that reported a quarter-billion-dollar loss ($257M) 2nd quarter and expects to see its cash balance shrink by another $800M by the end of the year?

The collateral will be "Delta's Pacific route authorities, slots and gate leaseholds". If Delta falters & the upcoming open-skies agreement with Japan becomes a reality, there will be supply of slots & gates on the market.
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Old Sep 16, 09, 2:46 pm
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Originally Posted by MikeMpls View Post
The collateral will be "Delta's Pacific route authorities, slots and gate leaseholds". If Delta falters & the upcoming open-skies agreement with Japan becomes a reality, there will be supply of slots & gates on the market.
I'm not entirely sure about this part. Even with Open Skies between Europe and the USA slots were hard to get at LHR and are still considered to be a premium value. I'm betting that all the NW NRT slots have similar fungability.
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Old Sep 16, 09, 3:00 pm
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Originally Posted by sbm12 View Post
I'm not entirely sure about this part. Even with Open Skies between Europe and the USA slots were hard to get at LHR and are still considered to be a premium value. I'm betting that all the NW NRT slots have similar fungability.
But in that case, why would anyone accept them as collateral?
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Old Sep 16, 09, 3:05 pm
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Originally Posted by MikeMpls View Post
More interesting is what kind of investor would take a chance on a company that reported a quarter-billion-dollar loss ($257M) 2nd quarter and expects to see its cash balance shrink by another $800M by the end of the year?
Who invests in an airline period? Especially a legacy carrier?

They ALWAYS lose money.
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Old Sep 16, 09, 3:38 pm
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Originally Posted by fti View Post
The pacific routes can't be worth much. Remember, DL took over NW because NW was hurting so much, and begged DL to take them over. That is what I read here on the forum, anyway.
The old NW debt that is being paid off by this newly issued debt was secured by these same assets.
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Old Sep 16, 09, 3:51 pm
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It's not the first time the NW Japan authorities and gates have been hocked, but some have very short and very selective memories.

http://www.redorbit.com/news/technol...finance_deals/
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Old Sep 16, 09, 4:54 pm
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Originally Posted by PMMMDL View Post
The old NW debt that is being paid off by this newly issued debt was secured by these same assets.

This is correct, since emerging from bankruptcy NWA's secured bank credit facility has been secured using the NRT route authorities as collateral. As far as who would take a risk in lending to DAL, I think we can assume that the value of the assets in hock exceeds the value of the credit line by a safe margin, limiting the lenders exposure. I agree that investing in airline equities is insane, but debt is a different ball game


As MikeMpls said, really just a routine corporate finance transaction.
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Old Sep 16, 09, 6:49 pm
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Big lenders have a rather recent history of having a very poor understanding of what is a "safe margin" so as to be able to absorb an asset becoming a non-performing asset. Remember the US government bailouts of banks and other big players in the debt market? It wasn't that long ago and that was also a product of "safe margin" being far more risky than they understood or cared to acknowledge.

Originally Posted by MikeMpls View Post
Sounds like a routine transaction that most businesses would want to make under the circumstances: Debt comes due, debt rolled over into new loans. The actual amounts, credit ratings & interest rates would have been interesting, but the article was pretty superficial & didn't dig into that.

More interesting is what kind of investor would take a chance on a company that reported a quarter-billion-dollar loss ($257M) 2nd quarter and expects to see its cash balance shrink by another $800M by the end of the year?

The collateral will be "Delta's Pacific route authorities, slots and gate leaseholds". If Delta falters & the upcoming open-skies agreement with Japan becomes a reality, there will be supply of slots & gates on the market.
Well stated. Given that longer term interest rates for dollar-denominated debt will be rising in the years ahead, it seems to be a reasonable attempt by DL. I just wouldn't want to be in the pool of investors buying up DL's debt.
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Old Sep 17, 09, 4:06 am
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Originally Posted by raehl311 View Post
Who invests in an airline period? Especially a legacy carrier?

They ALWAYS lose money.
GE & UTC, Airbus & Boeing, Unions, AMEX and the US Government...all of the smart investors run for the hills when their caller ID says XXXX Airlines
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Old Sep 17, 09, 6:45 am
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Originally Posted by socrates View Post
GE & UTC, Airbus & Boeing, Unions, AMEX and the US Government...all of the smart investors run for the hills when their caller ID says XXXX Airlines
There is a very big long term difference in return between investing in the equities and investing in the secured debt of airlines.

Lots of long term profits have been made investing in the secured debts of airlines, aggragate net losses in equities investing in the industry.
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Old Sep 17, 09, 6:56 am
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Originally Posted by PMMMDL View Post
There is a very big long term difference in return between investing in the equities and investing in the secured debt of airlines.

Lots of long term profits have been made investing in the secured debts of airlines, aggragate net losses in equities investing in the industry.
The secured debt of airlines tends to have a very, very good return.
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Old Sep 17, 09, 7:43 am
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Originally Posted by MikeMpls View Post
But in that case, why would anyone accept them as collateral?
Specifically because of that case - they have high value and are easily converted to cash if the lender defaults.
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