Business Context and Reporting Period
Company: Delta Air Lines, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: November 24, 2009
Event: Entry into a Material Definitive Agreement and Creation of Direct Financial Obligation regarding the issuance of Pass Through Certificates and Equipment Notes.
Key Financial Metrics
This filing details a specific financing transaction rather than general operating results. Key metrics related to the transaction include:
- Total Proceeds Raised: $688,740,000 via the sale of Pass Through Certificates, Series 2009-1.
- Debt Structure:
- Class A Certificates: $568,796,000 principal amount at 7.75% interest per annum.
- Class B Certificates: $119,944,000 principal amount at 9.75% interest per annum.
- Collateral: 27 Boeing aircraft (22 from the 2000-1 fleet and 5 delivered in 2009).
- Interest Payment Dates: Semiannually on June 17 and December 17, commencing June 17, 2010.
- Maturity Dates:
- Series A: December 17, 2019.
- Series B: December 17, 2016.
Note: The filing text does not provide values for revenue, net profit, operating cash flow, or general liquidity ratios.
Material Changes and Transaction Purpose
The primary material change is the creation of a new direct financial obligation to refinance existing debt and prepay obligations. The proceeds from the $688.74 million issuance are allocated as follows:
- Refinancing: Refinance 22 aircraft currently supporting the outstanding 2000-1 EETC (Equipment Trust Certificates) after its final maturity in November 2010.
- Prepayment: Prepay obligations under financings for 5 aircraft delivered in 2009.
- Other Uses: Pay fees and expenses related to the offering and for general corporate purposes.
Outlook, Risks, and Contingencies
Management Commentary: The transaction utilizes a pass-through trust structure where the Company issues equipment notes secured by specific aircraft. The underwriters (Goldman Sachs & Co. and Morgan Stanley & Co. Incorporated) purchased the certificates at 100% of principal.
Risks and Contingencies:
- Default Acceleration: Maturity of the Equipment Notes may be accelerated upon events of default, including failure to make payments when due, failure to comply with covenants, or certain bankruptcy events.
- Collateral Risk: The notes are secured by a lien on the specific aircraft and are cross-collateralized by other aircraft financed under the agreement.
- Related Party Transactions: The underwriters and their affiliates have engaged in other financial transactions with the Company, including advisory services, loans, and fuel hedging arrangements, for which they received customary fees.
Investor Verification Checklist
- Verify the specific aircraft serial numbers or tail numbers included in the 27 Boeing aircraft collateral pool.
- Confirm the exact terms of the "2000-1 EETC" being refinanced to assess the net interest savings or cost implications.
- Review the full Underwriting Agreement (Exhibit 1.1) and Note Purchase Agreement (Exhibit 4.13) for specific covenants and default triggers.
- Assess the impact of the new debt service obligations (starting June 2010) on the Company's projected cash flow for 2010 and beyond.
- Check for any subsequent filings regarding the final maturity of the 2000-1 EETC in November 2010.