Creditors paid heed to regulatory risks

ATLANTA — Delta rallied employees, lawmakers and customers to its side for more than two months to hammer home the belief that US Airways' proposal to buy the bankrupt carrier would be bad for everyone involved.

But in defeating the hostile bid Wednesday, the regulatory angle may have been Delta Air Lines Inc.'s most successful drumbeat.

A key group of Delta's creditors said in endorsing Delta's stand-alone plan Wednesday that it considered, among other things, the risks associated with and the likelihood of a successful consummation of US Airways' proposal.

Analysts had said regulatory concerns over US Airways' proposal might be a bigger issue than the $9.8 billion US Airways was offering for Delta. Delta had said the US Airways proposal would cause a significant delay in Delta's emergence from Chapter 11 because of how regulators would view the overlapping routes of the two carriers. US Airways had argued regulatory issues would not cause a delay.

But in the end, US Airways Group Inc. dropped its hostile bid after Delta's official committee of unsecured creditors said the carrier would be better off emerging from Chapter 11 on its own.

With the dual decisions, Atlanta-based Delta cleared a big hurdle in its effort to exit bankruptcy by the middle of this year as a stand-alone company.

But it isn't out of the woods yet. Smaller creditors could ultimately vote not to approve Delta's reorganization plan, and some have already filed objections to the disclosure statement to the Delta plan.

A Feb. 7 hearing in bankruptcy court in New York is scheduled to discuss the disclosure statement. If the statement related to Delta's operations is approved, Delta could begin soliciting votes for approval of its reorganization plan. Delta hopes to hold a confirmation hearing on its plan in April.

US Airways disclosed its initial hostile bid for Delta on Nov. 15. US Airways later raised its bid by nearly 20 percent in hopes of swaying Delta's official committee of unsecured creditors.

"Using the bankruptcy process the right way, Delta people have transformed their company's business model," Delta Chief Executive Gerald Grinstein said in a statement. "Our focus now is on the work still before us to emerge from Chapter 11 this spring as a strong, healthy and vibrant global competitor."