Business Context and Reporting Period
This Form 8-K Current Report was filed by Delta Air Lines, Inc. on July 3, 2012. The filing discloses the creation of a direct financial obligation through a Note Purchase Agreement entered into on the same date. The transaction involves the issuance of equipment notes secured by specific aircraft assets to fund the prepayment of existing debt obligations.
Key Financial Metrics
- Total Principal Amount: $479,892,000 in Equipment Notes.
- Series A Notes: $353,689,000 principal amount with an interest rate of 4.750% per annum.
- Series B Notes: $126,203,000 principal amount with an interest rate of 6.875% per annum.
- Collateral: 31 aircraft total, including nine Airbus A319s, seven Airbus A320s, one Boeing 757, eight Boeing 767-332ERs, and six Boeing 767-432ERs.
- Interest Payment Schedule: Semiannually on May 7 and November 7, commencing November 7, 2012.
- Principal Payment Schedule: Beginning May 7, 2013.
- Maturity Dates: Series A matures May 7, 2020; Series B matures May 7, 2019.
Material Changes and Transaction Details
Delta Air Lines entered into a Note Purchase Agreement to issue equipment notes secured by liens on 31 specific aircraft. The proceeds from the sale of Pass Through Certificates (Series 2012-1) were placed in escrow pending the purchase of the Equipment Notes by September 30, 2012. The transaction utilizes two pass-through trusts to facilitate the issuance. The notes are cross-collateralized by the aircraft financed under the agreement.
Outlook, Management Commentary, and Risks
Use of Proceeds: The Company expects to use the proceeds to reimburse itself for the prepayment or repayment at maturity of the 2001-2 EETC and 2002-1 EETC. Any remaining proceeds will be used for offering fees, expenses, and general corporate purposes.
Risks and Contingencies: Maturity of the Equipment Notes may be accelerated upon the occurrence of certain events of default. These include failure to make payments when due, failure to comply with covenants, or certain bankruptcy events involving the Company.
Underwriting: The Certificates were underwritten by Deutsche Bank Securities, Credit Suisse, Goldman Sachs, and Morgan Stanley, among others, on June 27, 2012, with delivery made on July 3, 2012.
Investor Verification Checklist
- Verify the specific aircraft serial numbers and delivery years listed as collateral against the company's current fleet registry.
- Confirm the status of the 2001-2 EETC and 2002-1 EETC to ensure the proceeds are applied to the intended prepayments.
- Review the Indenture and Security Agreement (Exhibit 4.15) for specific covenant restrictions and default triggers.
- Monitor the escrow account status to ensure funds are released to purchase the Equipment Notes by the September 30, 2012 deadline.
- Assess the impact of the new interest rates (4.750% and 6.875%) on the company's overall cost of debt compared to the refinanced obligations.