Business Context and Reporting Period
This Form 8-K Current Report was filed by Delta Air Lines, Inc. on August 17, 2011. The filing reports the completion of a financing transaction involving the issuance of Pass Through Certificates, Series 2011-1B (Class B Certificates), through a newly formed pass-through trust.
Key Financial Metrics
- Principal Amount: $102,000,000 aggregate principal amount of Class B Certificates and corresponding Series B Equipment Notes.
- Interest Rate: 7.125% per annum.
- Maturity Date: October 15, 2014.
- Interest Payment Schedule: Semiannually on April 15 and October 15, commencing October 15, 2011.
- Collateral: The notes are secured by a lien on 26 aircraft: ten Boeing 737-832s, twelve Boeing 757-232s, and four Boeing 767-332ERs.
- Underwriter: Citigroup Global Markets, Inc.
Material Changes and Transaction Details
On August 17, 2011, Delta completed the offering of the Class B Certificates. The proceeds from the sale of these certificates were used by the pass-through trust to acquire Series B Equipment Notes from the Company. The Class B Certificates rank generally junior to the Class A Certificates issued in a related transaction. Pending the purchase of the Series B Equipment Notes (scheduled by October 14, 2011), the proceeds were held in escrow with the Bank of New York Mellon.
Use of Proceeds and Management Commentary
Delta expects to use the proceeds from the issuance of the Series B Equipment Notes to reimburse itself, in part, for the repayment at maturity of an enhanced equipment trust certificate transaction entered into in September 2001. Any remaining proceeds will be used to pay fees and expenses related to the offering and for general corporate purposes. The filing notes that the transaction includes customary representations, warranties, and indemnification provisions.
Investor Verification Checklist
- Verify the specific aircraft serial numbers and delivery dates securing the $102 million in notes.
- Confirm the status of the escrowed funds and the timeline for the purchase of Series B Equipment Notes by October 14, 2011.
- Review the Intercreditor Agreement to understand the subordination of Class B Certificates relative to Class A Certificates.
- Assess the impact of the 7.125% interest rate on the company's overall debt service obligations.
- Examine the specific events of default that could accelerate the maturity of the notes.