US Airways gets commitment for $5.5 billion term loan, $1.65 billion bridge loan for Delta bid

By Sara Rosenberg

New York, Nov. 15 - US Airways Group Inc. has received a commitment for a $5.5 billion term loan and a $1.65 billion bridge facility to help back its bid for a merger with Delta Air Lines Inc., according to a company presentation made on Tuesday morning.

Citigroup has provided the financing commitments.

Under the proposal, Delta creditors would receive $4 billion in cash and 78.5 million shares of US Airways stock with an aggregate value of about $4 billion based on the closing price of the stock as of Nov. 14.

In addition to funding the proposed merger, the $7.15 billion of debt would refinance Delta's $1.9 billion debtor-in-possession financing facility and US Airways' $1.25 billion term loan.

The proposed merger is targeted to close in the first half of 2007, consistent with Delta's plan to emerge from Chapter 11. The companies still have to commence due diligence, enter into a merger agreement, file Hart-Scott-Rodino with the Department of Justice, file a plan of reorganization with the U.S. Bankruptcy Court, obtain Delta creditor approval, receive US Airways shareholder approval and Delta has to emerge from bankruptcy.

Tempe, Ariz.-based US Airways said that it expects the combination will generate at least $1.65 billion in annual synergies, including $935 million in network synergies and $710 million in net cost synergies.

US Airways first sent a letter to Delta on Sept. 29 proposing the merger of the two companies, but Delta's response to the proposal was basically to decline any sort of meeting. In a letter dated Oct. 17, Delta said: "Important milestones have been reached in our reorganization plan and we are confident of Delta's ability to emerge from bankruptcy as a strong, viable airline. Given the work that remains, we believe it would not be productive to engage in the type of exploratory discussions that you propose at this time."

As a result of Delta's stand-offish behavior, US Airways decided on Wednesday to take its proposal to the public so that Delta's creditors could have a chance to evaluate the transaction, claiming that the combination of the companies presents a significantly greater value for Delta's creditors, customers, employees and partners than a plan to emerge from bankruptcy on a standalone basis.

The combination of US Airways and Atlanta-based Delta would create one of the world's largest airlines and would operate under the Delta name.

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