It’s been more than a year since Delta went into bankruptcy just around the time US Airways emerged last September. Even back then we heard that it was the threat of competition from the reorganized US Airways—which merged with America West at the same time it exited bankruptcy—that helped push Delta over the edge. (Others said it was 9/11, higher fuel costs, JetBlue, hurricanes and almost anything else you can imagine.) So it’s especially delicious that Delta might emerge from bankruptcy with a helping hand from US Airways.
The deal involves a pretty significant haircut for unsecured investors—they’re getting about 50 cents on the dollar for around $16 billion of debt. But since the unsecured debt has recently been trading around 40 cents on the dollar, this means that at least some of the vulture investors should be pretty happy with the deal.
Here’s what we’re told is the scoop on the deal—it needs to get done soon, before the bankruptcy process moves along any further. The closer Delta gets to a solo exit—with a court affirming its current leases and various vendor deals in place—the smaller the gains from the combination. Usually “synergy” is corporate-speak for “vague plans to someday save money on a deal.” But here, assuming Delta can get out of a bunch of its current obligations as part of its bankruptcy exit, the synergies could be a reality.
US Airways Proposes $8 Billion Delta Air Takeover [Bloomberg]