From: http://www.ajc.com/business/content/business/delta/stories/2006/12/19/1219bizdeltaplan.html?cxntnid=bn121906e Delta files independence plan, slams buyout bid Ball may now be back in US Airways court for sweeter offer By RUSSELL GRANTHAM The Atlanta Journal-Constitution Published on: 12/19/06 Delta Air Lines on Tuesday filed its plan to emerge from Chapter 11 as a standalone company, and it ridiculed US Airways' $8.4 billion buyout bid as less valuable to creditors and harmful to both consumers and employees. In a statement accompanying the filing of its reorganization plan, Delta said its board of directors unanimously rejected the US Airways merger proposal and backs management's position. But the airline's creditors, who have a major voice in whether the merger goes forward, have not yet indicated a position. US Airways could sweeten its bid to woo them, or another bidder could emerge. Delta said US Airways' Nov. 15 proposal is "structurally flawed and cannot be executed as claimed due to overwhelming antitrust and labor issues." Delta also said the proposal relies on "claimed synergies that are premised on flawed economic assumptions" and would also burden the company with a "precariously" heavy debt load. A merger with US Airways would "erode the value of the Delta brand" and create knotty integration issues the smaller carrier could not manage, Delta said. Delta said its standalone reorganization plan values the company at between $9.4 billion and $12 billion ? more than the $8.4 billion offer from US Airways. The plan also estimates creditors will recover 63 percent to 80 percent of their claims in Delta's bankruptcy case, and that the airline will post operating profit margins of 8 percent to 10 percent in the next four years. The reorganization plan and board support essentially formalize Delta's argument of the past month that its creditors ? mainly suppliers and financial institutions owed billions ? should reject the bid and let the Atlanta airline continue its Chapter 11 recovery bid on its own. However, it also could send the ball back into US Airways' court. The Associated Press reported that "an official with knowledge of US Airways' plans" said the suitor is willing to sweeten its bid for Delta if it feels such a move is justified. Delta said its creditors will get new common stock to settle their claims. Delta's current stock will be canceled and worthless, the airline said. That is a common feature of Chapter 11 reorganizations and was always expected in Delta's case. Delta also said its plan calls for $2.1 billion in debtor-in-possession financing ? money that enabled the carrier to keep flying after filing for Chapter 11 protection in September 2005 ? to be rolled into a new financing package when it emerges from bankruptcy. The airline said it has gotten "multiple proposals with competitive terms and conditions for this exit financing" but did not disclose details. Delta hopes to convince creditors, who will vote on whatever reorganization plan is submitted to Delta's bankruptcy judge, that its current course is the best, creating one of the industry's lowest-cost competitors, with about $10 billion in debt ? half its previous debt load. The unsecured creditors are a key group in the takeover battle because they hold billions in Delta debt and have a large voice in any plan to bring the airline out of Chapter 11. The group includes huge suppliers such as Boeing along with financial backers and the carrier's pilots union. Delta says it has achieved most of its target of more than $3 billion in annual cost savings or new revenue through cuts in domestic capacity and a major expansion of its overseas network. In interviews and conference calls Tuesday, Delta's executives are expected to outline a reorganization plan that essentially continues that strategy while publicly criticizing US Airways' merger proposal. Part of Delta's argument is likely to be that it can emerge from bankruptcy as a standalone carrier and get its shares into creditors' hands before US Airways can complete a merger deal. Delta executives have said they expect Delta to emerge from Chapter 11 by the first half of 2007, while US Airways would probably face a lengthy review by federal regulators worried about the merger's effects on customers and competitors. US Airways has said such a review isn't likely to delay Delta's reorganization significantly or result in regulators blocking the deal. "We will remain a dedicated bidder," US Airways spokesman Phil Gee said on Tuesday, declining to elaborate. The Tempe, Ariz.-based company last month offered Delta's creditors $4 billion in cash and 78.5 million US Airways shares with a current market value of about $4.4 billion. Creditors would own about 45 percent of the combined company, which would be the nation's largest airline, with roughly $26 billion in revenue and about $22 billion in debt. Both sides will be watching for reaction from Delta's court-appointed committee of unsecured creditors. Some people suggested the committee could remain mum over the Christmas holiday ? if only to pressure both US Airways and Delta management to raise their offers.