UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 15, 2003
DELTA AIR LINES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-5424 58-0218548
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Hartsfield Atlanta International Airport, Atlanta, Georgia 30320
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(Address of principal executive offices)
Registrant's telephone number, including area code: (404) 715-2600
Not Applicable
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(Former name or former address, if changed since last report)
ITEM 5. OTHER MATTERS AND REGULATION FD DISCLOSURE
1. Financing Transactions with General Electric Capital Corporation
On April 15, 2003, Delta entered into the following four financing
transactions with General Electric Capital Corporation ("GECC"):
- Commitment to Issue Letters of Credit to Back Certain Delta
Obligations. Delta received a written commitment from GECC to issue $409 million
of irrevocable direct-pay letters of credit to back Delta's obligations with
respect to $403 million principal amount of outstanding variable rate airport
revenue bonds (the "Bonds"). The Bonds were sold to finance or refinance the
construction costs of certain facilities leased to Delta.
The GECC letters of credit are intended to replace irrevocable
direct-pay letters of credit issued by Commerzbank AG ("Commerzbank") which
terminate on June 8, 2003 and which currently back the Bonds. As provided in the
indentures governing the Bonds, there must be a mandatory tender for purchase of
the Bonds at least five days before the termination of the Commerzbank letters
of credit. Delta intends to cause the Bonds so purchased to be remarketed with
the support of the GECC letters of credit, and the proceeds of such remarketed
Bonds will be used to pay the purchase price of the Bonds being tendered. If the
Bonds are not remarketed as described above, the purchase price of the Bonds
being tendered will be paid from drawings under the Commerzbank letters of
credit, for which Delta will be obligated to reimburse Commerzbank by June 8,
2003. Delta believes that the Bonds could not be remarketed at this time without
the support of the GECC letters of credit or other appropriate credit
enhancement.
The GECC letters of credit will be issued, subject to customary closing
conditions, under a reimbursement agreement to be entered into between Delta and
GECC (the "Reimbursement Agreement"), the terms of which have been agreed in
substantially final form by Delta and
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GECC. Delta's obligation to reimburse GECC for drawings under these letters of
credit will be secured by nine Boeing 767-400 and three Boeing 777-200 aircraft
owned by Delta (the "LOC Aircraft Collateral"). In addition, these obligations,
so long as held by General Electric Company ("GE") or its affiliates, will also
be secured by 96 spare mainline engines (the "Engine Collateral") that are also
collateral for the Engine Financing obligations referred to below. The Engine
Collateral constitutes substantially all the spare mainline aircraft engines
currently owned by Delta.
- Engine Financing. Delta borrowed $135 million due in
installments from 2003 through 2010 (the "Engine Financing") and secured by the
Engine Collateral. In addition, these obligations, so long as held by GE or its
affiliates, will also be secured by the LOC Aircraft Collateral but only as long
as the GECC letters of credit or any advances made by GECC under the
Reimbursement Agreement are outstanding.
- Aircraft Financing. Delta borrowed $120 million due in
installments from 2003 through 2010 (the "Aircraft Financing") and secured by
five Boeing 767-400 aircraft owned by Delta (the "Other Aircraft Collateral").
In addition, these obligations, so long as held by GE or its affiliates, will
also be secured by (1) a substantial portion of Delta's mainline aircraft spare
parts ("Spare Parts Collateral") that are also collateral for the Spare Parts
Financing obligations referred to below and (2) the Engine Collateral.
- Spare Parts Financing. Delta borrowed $96.5 million due in
installments from 2003 through 2010 (the "Spare Parts Financing") and secured by
the Spare Parts Collateral. In addition, these obligations, so long as held by
GE or its affiliates, will also be secured by the Other Aircraft Collateral and
the Engine Collateral.
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In connection with these financings, Delta agreed that the Engine
Collateral will also secure, on a subordinated basis, certain other existing
debt and aircraft lease obligations of Delta to GE and its affiliates up to a
maximum amount of $230 million. The outstanding amount of these obligations is
substantially in excess of that amount.
Additional information about these four agreements is set forth in
Sections 2 and 3 below.
2. The GECC Letters of Credit and the Reimbursement Agreement
GECC's obligation to issue the letters of credit under the
Reimbursement Agreement will be subject to customary closing conditions. In
addition, Delta's ability to remarket the Bonds backed by the GECC letters of
credit will be subject to satisfactory review by rating agencies and other
parties to the Bond financings.
The GECC letters of credit, when issued, will have a scheduled expiry
date on the fifth anniversary of their date of issuance (the "Issue Date").
During that period, the GECC letters of credit will be drawn upon to pay the
principal of and interest on the Bonds and the purchase price of any Bonds that
are tendered for purchase but not remarketed.
GECC will have the right to cause a mandatory tender of all Bonds for
purchase, and a concurrent permanent early expiration of the letters of credit,
if an event of default occurs or if a minimum collateral value test (the "Value
Test") is not met on the third anniversary of the Issue Date. The Value Test
will not be met if (1) the appraised market value of the LOC Aircraft Collateral
at the date which is two years and ten months following the Issue Date is less
than two times the aggregate amount of the outstanding GECC letters of credit
plus any other amounts payable by Delta under the Reimbursement Agreement (the
"Aggregate Obligations") and (2) within 60 days thereafter, Delta has not either
provided additional collateral to GECC in the
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form of cash or aircraft or caused a reduction in the Aggregate Obligations
through the redemption or mandatory tender for purchase of the Bonds sufficient
to satisfy the Value Test. All redemptions or tenders for purchase of Bonds
described in this paragraph would be funded through drawings under the GECC
letters of credit and Delta would then be obligated immediately to reimburse
GECC for the entire amount drawn.
If there are drawings under a letter of credit to fund the purchase
price of Bonds tendered for purchase (other than as described in the preceding
paragraph), Delta's reimbursement obligation will be deemed to be an advance by
GECC to Delta bearing interest at a base rate or three-month LIBOR plus a
margin, subject to certain conditions precedent set forth in the Reimbursement
Agreement. Each advance will become due and payable when, and to the extent,
the related Bonds are remarketed. In addition, each advance will be repayable in
quarterly installments of principal calculated to amortize the advance by the
fifth anniversary of the Issue Date. Any subsequent remarketing proceeds of
Bonds will be used first to prepay outstanding advances and the remainder of
such proceeds, if any, will be paid to Delta. Delta may terminate the GECC
letters of credit, and repay any outstanding obligations under the
Reimbursement Agreement at any time prior to maturity, subject to certain
prepayment fees during the first two years.
For additional information regarding the Bonds, see Note 6 of the Notes
to the Consolidated Financial Statements (pages 43-46) in Delta's 2002 Annual
Report to Shareowners.
3. Borrowings Under the Engine, Aircraft and Spare Parts Financings
All borrowings by Delta under the Engine, Aircraft and Spare Parts
Financings described above bear interest at three-month LIBOR plus a margin. The
Aircraft and Spare Parts Financings are repayable at Delta's election at any
time, subject to certain prepayment fees during the first two years. The Engine
Financing is not repayable at Delta's election prior to maturity. As noted
above, the Aircraft and Spare Parts Financings are both secured by the Other
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Aircraft Collateral, the Spare Parts Collateral and the Engine Collateral. If
Delta repays one but not both of these financings, the remaining financing will
still be secured by all such collateral. The aggregate net proceeds to Delta of
approximately $350 million from these financings are available for general
corporate purposes.
None of these financings (or the Reimbursement Agreement) contain any
financial or negative covenants other than the Value Test described above.
4. Other Matters
On April 15, 2003, Delta terminated its credit facility with certain
banks under which Delta could borrow up to $500 million on a secured basis until
August 21, 2003. No amounts were outstanding under such facility. The aircraft
previously reserved as collateral under this facility are being or, in the case
of the Reimbursement Agreement, will be used as collateral in connection with
the four financing transactions with GECC described above.
Delta has a commitment from a third party, subject to the completion of
definitive documentation, for a fifteen-year facility under which Delta will
borrow approximately $138 million. These borrowings will be secured by one
Boeing 767-400 and one Boeing 777-200 aircraft owned by Delta.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DELTA AIR LINES, INC.
BY: /s/ Edward H. Bastian
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Edward H. Bastian
Senior Vice President - Finance and
Controller
Date: April 23, 2003
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