Delta Creditors Push for Jet Maintenance

A trustee for Delta Air Lines Inc. bond investors asked a bankruptcy court judge Tuesday to force the carrier to ensure proper maintenance of jets that are pledged as collateral for debt.

Wells Fargo Bank N.A., the bank serving as trustee for investors who purchased the carrier's debt, said it wants a guarantee that Delta will keep up with regular maintenance of 32 planes it used as collateral for a 2004 debt offering so the aircraft do not lose their value.

The trustee wants Delta to keep using the planes for passenger service, to ensure they remain airworthy.

As a trustee, Wells Fargo ensures that Delta bond holders receive timely principal and interest payments each month. The securities were sold with a 9.5 percent interest rate.

The bond holders have not received any of their principal and interest payments - about $250 million to date - after Delta declared bankruptcy in September 2005. That money is not expected to be paid back until the Atlanta-based company emerges from bankruptcy.

The trustee's attorney expressed concern in court that without proper maintenance, the planes' value would diminish and be worth less than the amount Delta owes the bondholders. Delta owns the 32 planes, a mix of Boeing 757s and 767s as well as MD-80 and MD-90 models.

Delta has maintained in court documents that it continues to keep up with the needed maintenance on the planes and estimated it has spent "tens of millions of dollars" on repairs and maintenance required by the Federal Aviation Administration.

The hearing on the issue will resume Wednesday, but U.S. Bankruptcy Judge Adlai Hardin said both sides should try to come to an agreement on their own.

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