Delta's Unofficial Creditors Wants US Airways to Hike Offer by $2B

A group of Delta Air Lines' creditors is trying to breathe life into US Airways' hostile takeover bid for the Atlanta carrier, but the Arizona airline stayed cool to the idea of a last-ditch bid sweetener as a Thursday deadline looms on its offer.

"We haven't officially raised our offer," said US Airways spokesman Phil Gee. He said a Thursday deadline still stands for the cash-and-stock offer for Delta, valued at almost $9.9 billion.

A group of hedge funds and other Delta creditors asked Tempe, Ariz.-based US Airways over the weekend to raise its bid by up to $2 billion to increase pressure for a deal before this week's deadline, said a person familiar with the talks.

According to this person, US Airways rejected the $2 billion figure but didn't rule out a $1 billion cash boost to its proposal, as well as a breakup fee if the deal ultimately fails.

Wall Street welcomed news of a possible fresh bid --- first reported in The Wall Street Journal on Monday --- by driving up prices of US Airways' shares and Delta's bonds.

A person familiar with the pro-merger creditor group, which says it owns about 15 percent of claims in Delta's Chapter 11 case, said US Airways indicated it was willing to raise its offer but provided no specifics.

In a statement Thursday, the group reiterated its support for US Airways' merger proposal, saying it "provides a superior recovery for creditors compared to what they would receive under Delta's standalone Chapter 11 plan."

It was unclear Monday what impact the maneuvering will have on Delta's court-appointed creditors committee, which is weighing the US Airways buyout offer against Delta's stand-alone reorganization plan.

Separately, several creditors of Delta's regional subsidiary, Comair, filed objections to Delta's description of its reorganization plan, which a judge is set to review next week.

The financial institutions and their leasing arms, such as BNY Leasing Equities and Mellon Leasing, said Delta and Comair needed to disclose more details.

The creditors also asked the court to delay a Feb. 7 hearing on the next steps in Delta's reorganization plan until Delta's board of directors examines any new proposal from US Airways.

US Airways has set Thursday as the deadline for the official creditors committee to agree to terms, including seeking postponement of the Feb. 7 hearing. US Airways also wants the committee to pressure Delta to take some initial steps toward a deal, such as filing an application with the Department of Justice for a review of the proposed merger.

The nine-member official committee was scheduled to meet Monday for updates from advisers.

The creditor group has typically scheduled in-person meetings each Wednesday --- in this case, on the eve of US Airways' deadline.

Creditors are split. Many bondholders, hedge funds and other investors that have bought up Delta's claims want the cash US Airways is offering. They are skeptical of Delta's claims that it will be worth up to $12 billion as a stand-alone carrier.

However, the official creditors committee also has several large suppliers such as Boeing, Coca-Cola and Pratt & Whitney, which have a longer-term interest in keeping Delta independent. Another committee member, Delta's pilots union, has loudly backed Delta's campaign, holding rallies, setting up a lobbying center in Washington and picketing US Airways' headquarters and some creditors' New York offices.

Delta's management wants to fly solo, taking the airline out of Chapter 11 as early as April 25 as an independent carrier. The airline could soon announce details of its exit financing.

Delta spokeswoman Gina Laughlin said the airline hasn't been informed of any new bid from US Airways.

"We are not aware of an increased offer," she said.

US Airways first surprised Delta in mid-November with an $8.5 billion cash-and-stock offer. It boosted its offer almost three weeks ago by about 20 percent, including $1 billion more in cash.

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