From Deseret News archives:

Creditors paid heed to regulatory risks

Published: Thursday, Feb. 1, 2007 10:22 a.m. MST
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Parker said the committee "is ignoring its fiduciary obligation" to the creditors it represents.

"Our proposal would have provided substantially more value to Delta's unsecured creditors than the Delta standalone plan," Parker said.

Delta's official unsecured creditors committee said in a statement it reached its decision after a lengthy review of both Delta's proposal and US Airways' proposal.

Analysts had said regulatory concerns over US Airways' proposal might be a bigger issue than the money at stake. 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.

Delta has said it projects it will be worth $9.4 billion to $12 billion when it emerges from bankruptcy. Its management had said repeatedly it wanted the carrier to remain on its own and not combine with US Airways.

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The official creditors committee said in its statement that it "has determined that it will support the stand-alone plan of reorganization as finally agreed upon between Delta and the creditors committee that will be filed later this week." It did not say if Delta's amended plan will make any major changes."

"The creditors committee reached this determination after engaging in extensive discussions with representatives of Delta and US Airways over the last two months and upon consideration of the advice of the creditors committee's legal, financial and industry advisers," the committee's statement said.

The statement added, "In reaching this decision, the creditors committee considered a variety of factors, including, but not limited to, valuation of, the timing and the risks associated with, and the likelihood of a successful consummation of the US Airways proposal and the (Delta reorganization) plan."

The committee said it will work with Delta to confirm Delta's plan. It did not elaborate on its reasoning for supporting Delta's plan.

Eventually, creditors will vote on whether to approve Delta's reorganization plan or any competing plan that may be filed with the court. The plan also must be approved by the court.

Typically, in each class of creditors, Delta's plan would have to be approved by holders of two-thirds of the claims and a majority of the number of individual creditors. If a class is not impaired — that is, if they are guaranteed of getting all of their money back no matter what — they generally don't get to vote.

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