Delta aircraft creditors say no to consent solicitation

New York, Aug. 26 - The committee of senior secured aircraft creditors of Delta Air Lines Inc. said they will refuse to go along with the airline's solicitation of consents to amend some of its equipment trust certificates and passthrough certificates.

The committee said its members hold more than $1.4 billion of the senior secured debt.

In an announcement, the group said it would not grant consents to the amendments because Delta has not provided it with requested due diligence information and will not "engage in any meaningful dialogue with the committee" over its restructuring efforts.

The Atlanta airline announced on Aug. 18 it had begun soliciting consents from holders of some of its equipment trust certificates and passthrough certificates to give it "greater flexibility to effect a successful out-of-court restructuring."

Holders are being asked to allow Delta to remove any contractual restrictions on the Atlanta airline's ability to purchase or hold those securities.

The consent solicitation runs through 5 p.m. ET on Aug. 31.

The creditors committee said it "is troubled by Delta's response to the committee's requests for information and dialogue and finds it inconsistent with Delta's stated goal of seeking expedited solutions to its financial problems."

It also said it disagreed with comments made by Delta in a question and answer statement released Thursday that failure to obtain consents would seriously limit its ability to take future restructuring steps.

"As previously announced, the committee believes that the consent solicitations are likely a first step in a possible debt restructuring, and that it would be imprudent, from its point of view, to respond without understanding Delta's restructuring plan," the committee said in a news release. "In the absence of that information, the committee concluded that it had no choice but to withhold its support of the solicitations."

In its question and answer release about the solicitation, Delta said:

(1) Why has Delta initiated a consent solicitation? Delta's answer, essentially, was that it would remove restrictions to a successful out-of-court restructuring.

(2) What are the consequences if the necessary consents are not obtained? Delta's answer, in essence, was that if it fails then its ability to include that debt in possible future restructuring steps would be seriously limited, which "Delta does not believe that result would be in the best interests of the holders."

(3) Why were the contractual restrictions originally included? Delta said, in part, that it believes the restrictions were included at the request of the owner participants in the related leveraged lease transactions.

(4) Why are certain ETCs and PTCs not included in the consent solicitation? Delta said a number of series of ETCs and PTCs do not contain contractual restrictions.

(5) Will the consent process modify the voting provisions or the economic terms? No, Delta said.

(6) Will Delta be able to vote any ETCs or PTCs that it owns? No, Delta said, neither Delta nor any of its affiliates will be able to vote any ETCs or PTCs that it owns.

(7) Is the waiver of the record date and other procedural requirements a change for purposes of the consent solicitation only or a permanent change to the underlying documents? Delta said the waiver of the record date and other procedural requirements is only for purposes of the consent solicitation.

(8) Will holders who consent be obligated to participate in any future offer that Delta may make? No, Delta said.

Merrill Lynch & Co., Goldman, Sachs & Co. and Morgan Stanley & Co. Inc. are the solicitation agents for the consent solicitation. Global Bondholder Services Corp. is the information agent (212 430-3774 or 866 470-3700).

Equipment trust certificates affected are: 1988 equipment trust certificates, series A, B and C; 1989 equipment trust certificates, series A, B, C, D, E, F, G, H, I and J; 1990 equipment trust certificates, series A, B, C, D, E, F, G, H, I, J and K; 1991 equipment trust certificates series A, B, C, D, E, F, G, H, I, J, K and L; and 1992 equipment trust certificates series A, B, C, D, E and F.

Passthrough certificates affected are 1992 passthrough certificates series A1, A2, B1 and B2; 1993 passthrough certificates series A1 and A2; and 1996 passthrough certificates series A1 and A2.

The contact for the noteholder committee is Michael J. Reilly at Bingham McCutchen LLP (michael.reilly@bingham.com or 860 240-2748).

Ronda Fears contributed to this story.

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