Form 8-k
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the
Securities
Exchange Act of 1934
Date
of
Report (Date of earliest event reported): September
16, 2005
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DELTA
AIR LINES, INC.
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(Exact
name of registrant as specified in its
charter)
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Delaware
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001-05424
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58-0218548
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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P.O.
Box 20706, Atlanta, Georgia 30320-6001
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(Address
of principal executive offices)
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Registrant’s
telephone number, including area code: (404)
715-2600
Registrant’s
Web site address: www.delta.com
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
1.01 Entry into a Material Definitive Agreement
The
text
set forth below under Item 2.03 is incorporated into this Item by this
reference.
We
have a
number of other commercial relationships with the lenders described in Item
2.03. We have entered into financing agreements, aircraft leases, and contracts
for the purchase of engines, among other arrangements, with GECC (as defined
below) and its affiliates. We have entered into credit card processing
agreements and agreements for the purchase of SkyMiles, among other
arrangements, with American Express Travel Related Services Company, Inc. and
its affiliates.
Item
2.03 Creation of a Direct Financial Obligation or an Obligations Under an
Off-Balance Sheet Arrangement of a Registrant.
On
September 14, 2005, we (together with certain of our subsidiaries) filed
voluntary petitions for reorganization under chapter 11 of the U.S. Bankruptcy
Code. Our cases were filed with the United States Bankruptcy Court for the
Southern District of New York (“Court”).
In
connection with the proceedings, we arranged for post-petition financings in
the
aggregate amount of $2.05 billion. On September 16, 2005, the Court granted
our
request for interim orders (“Interim
Orders”)
authorizing our entering into definitive agreements for these financings, which
are described below. On that date we borrowed $1.75 billion of the total amount
of $2.05 billion committed under the agreements for the financings. The Court
has scheduled a hearing on October 6, 2005 to consider entry of orders granting
final approval for these financings (“Final
Orders”),
including our borrowing the remaining $300 million.
DIP
Credit Facility
On
September 16, 2005, we entered into a Secured Super-Priority Debtor In
Possession Credit Agreement (the “DIP
Credit Facility”)
to
borrow up to $1.7 billion from a syndicate of lenders arranged by General
Electric Capital Corporation (“GECC”)
and
Morgan Stanley Senior Funding, Inc. (“Morgan
Stanley”),
for
which GECC would act as administrative agent. The DIP Credit Facility consists
of a $600 million Term Loan A arranged by GECC (the “TLA”),
a
$600 million Term Loan B arranged by GECC (the “TLB”)
and a
$500 million Term Loan C arranged jointly by GECC and Morgan Stanley (the
“TLC”;
together with the TLA and TLB, collectively, the “DIP
Loans”).
The
Interim Orders authorized us on an interim basis to borrow up to $1.4 billion
of
the DIP Loans. We applied a portion of these proceeds to repay in full (1)
the
$480 million outstanding under our pre-petition facility for which GECC was
agent (the “GE
Pre-Petition Facility”) and
(2) the $500 million outstanding under the Amex Pre-Petition Facilities (defined
below). The remainder of the proceeds of the DIP Loans will be used for our
general corporate purposes.
Of
the
amounts borrowed on September 16, 2005, $300 million was attributable to the
TLA. The remaining $300 million under the TLA will be available to be drawn
after we obtain the Final Orders, subject to certain conditions, including
(1)
satisfaction at that time of the Liquidity Covenant described below and (2)
confirmation that there has been no material adverse change in our business,
assets, operations or financial or other conditions (other than related to
the
commencement of our bankruptcy case). Furthermore, availability under the TLA
is
subject to a borrowing base calculation.1 If
the
outstanding amount of the TLA at any time exceeds the borrowing base, we must
immediately repay the TLA in an amount equal to the excess. The TLA matures
on
March 16, 2008. The TLA bears interest at LIBOR or an index rate, at our option,
plus a margin of 5.00% over LIBOR and 4.25% over the index rate. We may also
request the issuance of up to $200 million in letters of credit under the DIP
Credit Facility, which amount must be fully cash collateralized at all times
such letters of credit are outstanding.
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The
borrowing base is defined as the sum of (i) up to 80% of the book
value of
eligible billed accounts receivable, (ii) up to 50% of the book value
of
eligible unbilled accounts receivable, (iii) the lesser of 50% of
the book
value of eligible refundable tickets and $30 million, (iv)
the lesser
of 50% of the fair market value of eligible real estate and $100
million,
(v) the lesser of 50% of the net orderly liquidation value (“NOLV”) of
eligible aircraft and $250 million, (vi) the lesser of 30% of the
NOLV of
eligible aircraft consisting of Comair CRJ-100 ERs aircraft and $13.5
million, (vii) the lesser of 40% of the half life NOLV of eligible
engines
consisting of the Comair CF34-3A1 engines and $13.5 million, (viii)
the
lesser of 65% of the half life NOLV of eligible engines consisting
of the
Comair CF34-8C1 engines and $5.1 million, (ix) the lesser of 50%
of the
NOLV of eligible flight simulators and $25 million, (x) the
lesser of
25% of the NOLV of eligible spare parts and $7 million, (xi) the
lesser of
25% of the NOLV of eligible ground service equipment and $25 million,
(xii) the lesser of 25% of the NOLV of certain other eligible equipment
and $25 million and (xiii) the amount of cash held in a cash collateral
account pledged to the lenders under the DIP Credit Facility (minus
the
amount of all letters of credit issued under the DIP Credit Facility),
less reserves established from time to time by the Agent in its reasonable
discretion, including a reserve in the amount of $50 million for
maintenance of collateral and liquidation expenses and a reserve
for the
payment of certain professional fees and expenses in connection with
our
bankruptcy cases (currently $35 million). The aggregate amount of
eligibility pursuant to clauses (i), (ii) and (iii) above may not
exceed
$400 million.
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On
September 16, 2005, we borrowed in full the total amount of our TLB and TLC
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$600 million and $500 million, respectively. Each of the TLB and the TLC matures
on March 16, 2008. The TLB and TLC each bears interest at LIBOR or an index
rate, at our option, plus a margin of 7.00% over LIBOR and 6.25% over the index
rate, in the case of the TLB, and 9.00% over LIBOR and 8.25% over the index
rate, in the case of the TLC.
Our
obligations under the DIP Credit Facility are guaranteed by substantially all
of
our domestic subsidiaries as debtors-in-possession (“Guarantors”).
We
will be required to make certain mandatory repayments of the DIP Loans in the
event we sell certain assets, subject to certain exceptions. Any portion of
the
DIP Loans that are repaid through either voluntary or mandatory prepayment
may
not be reborrowed.
The
DIP
Loans and the related guarantees are secured by first priority liens on
substantially all of our and the Guarantors’ present and future assets
(including assets that previously secured the GE Pre-Petition Facility) and
by
junior liens on certain of our and our Guarantors’ other assets (including
certain accounts receivable and other assets subject to a first priority lien
securing the Amex Post-Petition Facility described below), in each case subject
to certain exceptions, including an exception for assets which are subject
to
financing agreements that are entitled to the benefits of Section 1110 of the
Bankruptcy Code, to the extent such financing agreements prohibit such
liens.
The
DIP
Credit Facility includes affirmative, negative and financial covenants that
impose substantial restrictions on our financial and business operations,
including our ability to, among other things, incur or secure other debt, make
investments, sell assets and pay dividends or repurchase stock.
The
financial covenants require us to:
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maintain
unrestricted funds in an amount not less than $750 million through
May 31,
2006; $1 billion at all times from June 1, 2006 through November
30, 2006;
$750 million at all times from December 1, 2006 through February
28, 2007;
and $1 billion at all times thereafter (the “Liquidity
Covenant”);
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not
exceed specified levels of capital expenditure during any fiscal
quarter;
and
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achieve
specified levels of EBITDAR, as defined, for successive trailing
12-month
periods through March 2008. During 2005, we are required to achieve
increasing levels of EBITDAR, including EBTIDAR of $644 million for
the
12-month period ending December 31, 2005. Thereafter, the minimum
EBITDAR
level for each successive trailing 12-month period continues to increase,
including $1.372 billion for the 12-month period ended December 31,
2006;
$1.988 billion for the 12-month period ending December 31, 2007;
and $2
billion for each 12-month period ending thereafter. If our cash on
hand
exceeds the minimum cash on hand that we are required to maintain
pursuant
to the Liquidity Covenant, then the EBITDAR level that we are required
to
achieve is effectively reduced by the amount of such excess cash,
up to a
maximum reduction of $250 million from the required EBITDAR
level.
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The
DIP
Credit Facility contains events of default customary for debtor-in-possession
financings of this type, including cross defaults to the Amex Post-Petition
Facility and certain change of control events. It is also an event of default
if
all or substantially all of our flight and other operations are suspended for
longer than two days, other than in connection with a general suspension of
all
U.S. flights, or if certain routes and, subject to certain materiality
thresholds, other routes, and slots and gates are revoked, terminated or
cancelled. Upon the occurrence of an event of default, the outstanding
obligations under the DIP Credit Facility may be accelerated and become due
and
payable immediately.
Financing
Agreement with Amex
On
September 16, 2005, we entered into an agreement (the “Modification
Agreement”)
with
American Express Travel Related Services Company, Inc. (“Amex”)
and
American Express Bank, F.S.B. pursuant to which we modified certain existing
agreements with Amex, including two agreements (the “Amex
Pre-Petition Facilities”)
under
which we had borrowed $500 million from Amex. The Amex Pre-Petition Facilities
consist of substantially identical supplements to the two existing agreements
under which Amex purchases SkyMiles from us, the Membership Rewards Agreement
and the Co-Branded Credit Card Program Agreement (collectively, the
“SkyMiles
Agreements”).
As
required by the Modification Agreement, on September 16, 2005, we used a portion
of the proceeds of our initial borrowing under the DIP Credit Facility to repay
the principal amount of $500 million, together with interest thereon, that
we
had previously borrowed from Amex under the Amex Pre-Petition Facilities.
Substantially simultaneously, pursuant to the Interim Orders, we borrowed $350
million from Amex pursuant to the terms of the Amex Pre-Petition Facilities
as
modified by the Modification Agreement (the “Amex
Post-Petition Facility”).
The
amount borrowed under the Amex Post-Petition Facility will be credited, in
equal
monthly installments, towards Amex’s actual purchases of SkyMiles during the
17-month period commencing in July 2005. Any unused prepayment credit will
carry
over to the next succeeding month with a final repayment date for any then
outstanding advances no later than November 30, 2007. The outstanding advances
will bear a fee, equivalent to interest, at a rate of LIBOR plus a margin of
10.25% over LIBOR.
Our
obligations under the Amex Post-Petition Facility are guaranteed by the same
Guarantors as for the DIP Credit Facility. Our obligations under certain of
our
agreements with Amex, including our obligations under the Amex Post-Petition
Facility, the SkyMiles Agreements and the agreement pursuant to which Amex
processes travel and other purchases made from us using Amex credit cards
(“Card
Services Agreement”),
and
the corresponding obligations of the Guarantors, are secured by (1) a first
priority lien on our right to payment from Amex for purchased SkyMiles and
our
interest in the SkyMiles Agreements and related assets and our right to payment
from Amex under and our interest in the Card Services Agreement and (2) a junior
lien on the collateral securing the DIP Credit Facility.
With
certain exceptions, the Amex Post-Petition Facility contains affirmative,
negative and financial covenants substantially the same as in the DIP Credit
Facility. The Amex Post-Petition Facility contains customary events of default,
including cross defaults to our obligations under the DIP Credit Facility and
to
defaults under certain other of our agreements with Amex. Upon the occurrence
of
an event of default under the Amex Post-Petition Facility, the loan under the
Amex Post-Petition Facility may be accelerated and become due and payable
immediately.
The
DIP
Credit Facility and the Amex Post-Petition Facility are subject to an
intercreditor agreement that generally regulates the respective rights and
priorities of the lenders under each Facility with respect to collateral and
certain other matters.
Item
8.01 Other Events
In
connection with Delta's Chapter 11 filing, on September 16, 2005,
the
Court granted a motion and entered an interim order on the docket (the
“NOL
Order”),
to
assist us in monitoring and preserving our net operating losses by imposing
certain notice and hearing procedures on trading in (1) our equity securities
and (2) claims against us. Under the NOL Order, any person or entity that is
a
Substantial Equityholder or Substantial Claimholder (each as defined below)
must
provide advance notice to the Court, to us and our counsel prior to purchasing
or selling any of our equity securities or claims against us, and we shall
have
fifteen (15) calendar days after receipt of such notice to object to any
proposed transfer. If we file an
objection, such transaction would not be effective unless approved by a final
and nonappealable order of the Court. If we do not object within such fifteen
(15) day period, such transaction may proceed solely as set forth in the notice.
Moreover, the NOL Order requires that a Substantial Equityholder or
Substantial Claimholder file and serve a notice setting forth the size of their
holdings on or before the later of (1) fifteen (15) days after the effective
date of the notice of entry of the NOL Order or (2) ten (10) days after becoming
such a beneficial owner.
In
general, the NOL Order applies to any person or entity that, directly or
indirectly, beneficially owns (or would beneficially own as the result of a
proposed transfer) (1) 7,464,750 million or more shares of our Common Stock
(such entity, a “Substantial
Equityholder”)
or (2)
an aggregate principal amount of claims against us equal to or exceeding $175
million (such entity, a “Substantial
Claimholder”).
Pursuant
to the NOL Order, any purchase, sale or other transfer of equity securities
or
claims in violation of these procedures will be null and void ab initio in
violation of the automatic stay under Section 362 of the Bankruptcy Code. The
NOL Order will remain in effect until the Court holds a hearing to reconsider
the appropriateness of that order. The hearing is currently set for October
6,
2005.
The
above
summary of certain terms of the NOL Order is qualified in its entirety by the
NOL Order and the related motion (including exhibits thereto), which are
attached as Exhibit 99.1 hereto.
Item
9.01 Financial Statements and Exhibits
Exhibit
99.1— Revised Interim Order of the U. S. Bankruptcy Court for the Southern
District of New York Pursuant to Sections 105(a) and 362 of the Bankruptcy
Code Establishing Notification Procedures and Approving Restrictions on Certain
Transfers of Claims Against and Interests in the Debtor's Estates, dated
September 16, 2005.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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DELTA
AIR LINES, INC.
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By:
/s/ Edward H.
Bastian
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Date:
September 22, 2005
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Edward H. Bastian
Executive Vice President and Chief Financial
Officer
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EXHIBIT
INDEX
| Exhibit
Number |
Description
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| 99.1 |
Revised Interim Order of the U. S. Bankruptcy
Court for
the Southern District of New York Pursuant to Sections 105(a)
and 362
of the Bankruptcy Code Establishing Notification Procedures and
Approving
Restrictions on Certain Transfers of Claims Against and Interests
in the
Debtor's Estates, dated September 16,
2005. |
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