Delta Asks Court OK For Debt Refinancing

Delta Air Lines, in a deal to avoid possible repossession of five jets, wants bankruptcy court approval for a plan to repay more than $242 million to holders of aircraft-related bonds and to refinance the debt.

Delta also asked for approval to hire Merrill Lynch to help arrange the new financing.

If approved, bondholders would be repaid for the full $235 million in debt plus more than $7 million in unpaid interest from the new financing and Delta's cash reserves, according to court papers.

Delta said it is still negotiating terms of the replacement financing but that interest and other costs would be the "best available in the reasonable business judgment" of the company.

Delta is restructuring and cutting its debts while in Chapter 11 protection from creditors.

The deal would complete another sizable chunk of the Atlanta carrier's restructuring efforts to cut lease and financing costs on its jet fleet. The debt at issue is backed by 32 Delta aircraft.

Last year, in a separate deal, Delta restructured lease contracts on 89 jets, saying it would save hundreds of millions in rent payments. The carrier is still negotiating new financing for more than 100 smaller regional jets.

In the latest proposed settlement, Delta agreed to pay the expenses of the bondholder's trustee, Wells Fargo Bank Northwest, and to cover long-term maintenance expenses and millions of dollars in monthly payments on the five MD-90 jets that the lenders had threatened to repossess.

The debt had already been refinanced as part of a series of moves by Delta in late 2004 to avoid bankruptcy court. Bondholders agreed then to exchange older debt that was coming due in 2005 and this year for new debt that paid higher interest --- 9.5 percent --- and matured up to three years later.

Most is held by institutional investors such as insurance companies.

A court hearing on the proposed settlement and new financing plan is scheduled July 26 in New York.

Since it filed for Chapter 11 protection 10 months ago, Delta has not made any interest or debt repayments on the loan, other than $6 million paid into a reserve account under the court order.

Separately, U.S. Bankruptcy Judge Adlai Hardin held a hearing Monday on Delta's renewed efforts to impose pay cuts on unionized flight attendants at its Comair regional carrier. The hearing continues today.

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