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Delta Air Lines, Inc. Message Board

  • bobof1y777 bobof1y777 Sep 16, 2004 9:07 PM Flag

    bondholders xplore forcing delta to bk

    the decleration by S&P of delta being in default coupled with their fraudlent intention might lead bondholders to file to force delta into bk and take control of the company. Delta is playing with fire

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    • Okay, we can probably finish up these details; in the end these details won't matter a whole lot, but it can fill the time.

      As for "when the exchange involves a reduction in principal. If the value you receive is no greater than what you would receive in a liquidation, there's no preference," that will be the 64,000 lira question, because that item, if decided a posteriori and judicially, will be determined in a bankruptcy, when even the collateralized creditors may be forced, in Ch. 11, to accept less in a cramdown than otherwise, and they are looking at some "newly collateralized" as "nouveau riche" taking up part of the carpet where they hadn't been before. To me, they would automatically compare these carpetbaggers with the rest of the uncollateralized (the newly poor) and make the obvious legal comparison.

      As for this board being on drugs, I have to agree with Lucky--this is the most worthless board even in the Kingdom of Yahoo. The noise to signal ratio is easily 100 to 1, and that's being very generous to the signal side. I have put 100 people on ignore and it is still close to unreadable, with bobos and flygirls and countless others wanting to talk sex, drugs and John Kerry. I basically look for Lucky's posts, and see what he is talking about, fwiw.


    • <<you wouldn't need a breach of negative covenant to trigger a cross default, you would only need any breach of any obligation>>

      I agree. Sorry if I seemed to suggest otherwise.

      <They say they don't have negative covenants in their loan docs and indentures?>>

      I read it. I think it was in the 10-K. I found it hard to believe as well. I thought that perhaps what they meant was that they didn't have negative covenants based on balance sheet or cash flow triggers, since the main point would seem to be that they won't be faced with a technical default that they can't avoid as their financial picture worsens. Negative covenants that prevent them from doing certain things are at least within their control (assuming the negative covenant on the senior debt is in sync with the subordination provision of the junior debt).

      <<On preferences, I don't see how you can collateralize the uncollateralized debt and just hope for the best.>>

      I don't mean to suggest that DAL would just hope for the best, but if you are a noteholder who is offered what seems to you to be a better deal than the one you currently hold, you might do just that - take the deal, hope it stays out of an 11 for 90 days, and if it doesn't, be prepared to have the deal undone. That all assumes you don't have another card you want to play or a different value you ascribe to your note relative to what's offered. If you think it's a good deal, and you lack other options, then I think you would accept the preference risk. The preference risk, by the way, is not a clearcut issue when the exchange involves a reduction in principal. If the value you receive is no greater than what you would receive in a liquidation, there's no preference.

    • On cross defaults (it's been a long time since I worked with them), no, you wouldn't need a breach of negative covenant to trigger a cross default, you would only need any breach of any obligation, the most obvious one being failure to pay obligations when due, but also breaches of positive covenants, reps or warranties, contained in any listed cross default document, which would be the Delta universe.

      They say they don't have negative covenants in their loan docs and indentures? That would seem impossible to me. They have to have senior and subordinated obligations, right? Could they pay their subs in advance of their seniors (a typical negative covenant)? Make dispositions of property (planes, hubs), lease and sublease property?

      Doesn't sound right to me (but of course they have negative covenants, plenty of them, and of course the question of default and cross default doesn't need negative covenants, it basically walks down the table of contents).

      On preferences, I don't see how you can collateralize the uncollateralized debt and just hope for the best.


    • Interestingly, Delta claims to have no negative covenants in its debt. Cross defaults are probably all over the place, but you still have to have the first one, don't you? Sooner or later, though, the billions of debt, lease obligations and pension obligations are going to be too much to service. Delta probably won't wait until it's out of cash to file.

      My beef with Lucky? I don't like guys who disagree by spouting incorrect information as fact. I don't mind a disagreement with my opinions, and I don't mind a healthy debate of my assertions with contrary facts and arguments. But when you are just plain wrong in an arrogant post with comments like "is everyone else on drugs?", it gets under my skin. A weakness of mine, I suppose. I prefer to keep a sense of humor about me, and maybe I should try to regain it.

      On preference issues, as I said, it's pretty rare for a creditor to want to pass the deal up. As to a fraudulent conveyance, which you seem to be addressing, the thought process is a little trickier, but you might still say, "Why not?" because the typical remedy just undoes the exchange and puts you back where you started. And a legal opinion is not going to address the relative values of the exchanged notes, but I seem to recall that there is a provision in the Uniform Fraudulent Transfer Act that would protect this type of exchange from challenge as a fraudulent conveyance.

    • It's really rather irrelevant, isn't it? With $bbbbbillions of debt, claims and covenants out the wazoo, cross defaults written into every single financing document on every single loan, piece of equipment, toilet and sink?

      What exactly is your beef with Lucky, anyway?

      On the subject of preferences, if uncollateralized debt gets collateralized in an exchange, then I think you are right that 90 days looks right, unless of course, other creditors succeed in having the transfer deemed to be more than constructive fraud (90 days) and deemed to be actual fraud (1 year). Any debt holder accepting such an exchange would want a legal opinion that the exchange qualified for "reasonably equivalent value" to avoid these issues.


    • the amount they got is much less than that. but do u think they would pay all the interest due in 90 days from october? I think that fradulent transfer could be challanged even if it was in 6 months b4 filing?

    • I do not suffer fools of the lucky sort gladly, I confess.

      There is a possibility of an involuntary filing by a single creditor in only very limited instances. In practically all cases of any significance, it takes 3. If the original petition fails to include 3 petitioning creditors, I believe the debtor could force a dismissal very quickly unless the petitioning creditor were prepared to make a showing that the limited "small case" exception applied.

      The "joined in" business is sort of pointless semantics in my book. I can tell you that bankruptcy attorneys use the phrase to describe those who are either on the original petition or those who come in later.

    • Hey, careful there, luckikaziee....

      you failed to include any misinformation in that post. You're slipping!

    • You were a little rough on my friend, Lucky, weren't you?

      Not that it matters so much, as these are details we need not get bogged down in, while the Bankruptcy Code provides that an involuntary case needs to be filed by 3 or more holders of claims, blah blah blah (Sec. 303(b)(1), etc.), you SHOULD NOTE that the Bankruptcy Rules seem to provide for the (rare) instances when fewer than 3 creditors have successfully filed an involuntary petition (Bankruptcy Rule 1003 "(b) Joinder of Petitioners After Filing. If the answer to an involuntary petition filed by fewer than three creditors . . ." )

      So, in fact, there must be some provision for the involuntary petition to be instigated by fewer than 3 claimants, right? I assume there is some part of the Bankruptcy Code, Rules or Legislative history which provides for a single creditor whose contract is in default to be able to put a debtor into bankruptcy.

      The other creditors are permitted, after their names are added, to join in the action (but they don't "join in filing" it; it's been filed already.)

    • <<one factor also is that interest is due october 15 (5%) they need to pay that interest and if they didn't they'll be forced to bk within 30 days. there is no hope for 90 days>>>

      Of course, you ignore the fact that the company has something like $1,500,000,000.oo. I suppose they *could* use some of this to pay interest due!

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