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Delta extends its offer on debts

Creditors who agree early will get a better deal

SHARE Delta extends its offer on debts

ATLANTA — Delta Air Lines Inc., which is trying to restructure its massive debt, has extended a recent debt exchange offer to next month, but will give some creditors a better deal if they agree to the terms within the next two weeks.

By encouraging debtholders to agree to the offer early and giving some of them an incentive to do so by Oct. 26, the Atlanta-based airline is signaling that it is getting down to the wire in terms of deciding whether to seek Chapter 11, airline analyst Ray Neidl said Thursday.

"They've got to get this sooner rather than later or they will go into bankruptcy," said Neidl, of Calyon Securities Inc. in New York.

In a statement, Delta also said it is amending certain terms of the offer.

Delta had offered to exchange $680 million of its debt with new notes secured by $1.3 billion worth of debt-free aircraft, flight simulators and flight training equipment. The offer, which initially was to expire Thursday, was made to holders of $2.6 billion in various forms of Delta debt.

In its amended offer, which was issued just before midnight Wednesday, Delta said the current value of the aircraft and equipment it is using as collateral is now $1.2 billion.

Delta, the nation's third-largest carrier and operator of a hub at Salt Lake City International Airport, said the offer is subject to the condition that it enters into a new contract with its pilots union that provides at least $1 billion of annual cost reductions by 2006. To date, the pilots have not agreed to the concessions request. Negotiations are ongoing.

The pilots union said Thursday afternoon that progress is continuing to be made on negotiations over management's concessions request. The union has publicly offered up to $705 million in annual savings, though it made a new contract proposal last Friday night. The union has refused to release details of the new offer.

The two sides have met several times during the last week and "are discussing a wide range of topics," union spokesman Chris Renkel said in a memo to pilots. "While there are major issues to be resolved, we are making progress."

In its new debt exchange offer, Delta asked its debtholders to respond quickly so it knows how successful it will be.

If the holders of roughly $330 million of outstanding notes agree to the offer by Oct. 26, they will get new notes equal to the ones they hold. If they agree after that date but before the Nov. 18 deadline, they will get new notes equal to only half of the ones they hold.

The holders of the remaining amount of debt Delta is offering to exchange would only get new notes worth 40 percent to 45 percent of the value of the ones they currently hold. However, the airline said it would give those debtholders some of its stock if they agree to the offer by Oct. 26.

In response to a request for further comment, Delta said in an e-mail statement: "The permanently changed aviation marketplace and Delta's unsustainable financial losses confirm that our survival requires a viable cost structure."

Delta, which has $20.6 billion in total debt, has warned of the possibility of bankruptcy if it doesn't get a pilot deal and agreements on its debt restructuring plan within the next several weeks.

In trading Thursday on the New York Stock Exchange, shares of Delta rose 41 cents, or 10.8 percent, to close at $4.21.