Delta Ups Comair's Estimated Value

Delta Air Lines said Comair could be worth up to $840 million, giving creditors of its regional subsidiary a shot at recovering all their claims once the airlines emerge from bankruptcy.

The new estimate, contained in an amended reorganization plan filed Friday in federal bankruptcy court, did not change Delta's valuation of its overall operations from an earlier range of $9.4 billion to $12 billion.

It also did not shed any new light on Delta's effort to fend off a hostile takeover bid by US Airways. Rather, it added detail to the stand-alone reorganization plan that Delta hopes creditors will support instead of the merger bid.

Delta estimated that Cincinnati-based Comair is worth $610 million to $840 million, allowing Comair's suppliers, bondholders and other unsecured creditors to recover 76 percent to 100 percent of their claims.

Delta estimated that unsecured creditors of the mainline carrier will recover 62 percent to 78 percent of their claims, slightly lower than an earlier estimate.

Delta said the core airline will be worth about $8.8 billion to $11.1 billion to creditors, who will be its new shareholders.

The amended plan also made clear that the number of new Delta shares that creditors walk away with will shrink once compensation for Delta executives is deducted.

Delta hasn't disclosed details of its plans for executive compensation after emerging from Chapter 11. Such plans typically include stock or related securities equaling a 5 percent to 10 percent stake in the company.

Delta said it plans to disclose such details "no later than 20 calendar days before" an April 9 deadline for a creditor vote on the reorganization plan.

Delta also revised its estimate of the overall claims pool, from $15 billion to $14.2 billion, that will be used to divvy up stakes in the new company if its reorganization plan is approved by creditors. Delta will issue new shares in proportion to each creditor's share of the total claims pool. The ratio of claimants to the value of the Comair subsidiary is different than it is for Delta, resulting in the higher payback rate.

Existing Delta shares are to be canceled, as is common in Chapter 11 cases.

The added detail comes as creditors focus on comparing Delta's stand-alone reorganization plan to US Airways' hostile $10 billion-plus takeover bid. US Airways boosted its offer last week from about $8.5 billion.

Delta is seeking a Feb. 7 court hearing that could clear the way for it to begin soliciting creditors' votes. US Airways has set a Feb. 1 deadline for a creditor response to its offer. It also wants creditors to tell Delta to postpone the hearing.

A group of hedge funds and other investors that says it holds about $2.4 billion of Delta's claims has urged Delta to seriously consider US Airways' offer, but the powerful unsecured creditors committee has remained mum.

Delta also said in its filing Friday that it plans to present its analysis of US Airways' higher offer to its board of directors "in the near future," but there appears to be little suspense on that front. The board has already rejected US Airways' first offer, and Delta said in its filing that the new offer would increase Delta's debt by another $1 billion and "did not address significant concerns" from the first offer.

Delta claims a merger with US Airways would overburden the merged airline with debt and isn't likely to survive an antitrust review by the federal Department of Justice.

US Airways disputes such arguments, countering that the merged companies will make a stronger competitor and that Delta's valuation of itself isn't credible.

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