Standard & Poor’s puts Delta on CreditWatch citing bankruptcy risk

Standard & Poor’s puts Delta on CreditWatch citing bankruptcy risk    Standard & Poor’s, the New York-based investment rating service, Tuesday placed its ratings on Delta Air Lines, on CreditWatch with negative implications, reflecting a very high risk of near-term bankruptcy.
   “The recent surge in fuel prices and Delta’s disclosure that it will have to post $750 million of cash collateral to extend its credit card processing agreement indicate that the airline’s already slim chances of avoiding bankruptcy are dwindling rapidly,” said Standard & Poor’s credit analyst Philip Baggaley.
   Delta said Monday it plans to sell its wholly owned regional airline subsidiary Atlantic Southeast Airlines to SkyWest Inc. for $350 million immediately ($100 million of which will be applied to partly prepaying a credit facility), plus $125 million later upon fulfillment of certain conditions.
   Despite this, the airline said it expects its cash reserves “will decline substantially during the remainder of 2005.”
   “Delta will likely have to decide whether it can avoid bankruptcy by Oct. 17, at the latest, after which amendments to the federal bankruptcy code implement less favorable terms for debtors,” said Standard & Poor’s. “Unfortunately, new pension legislation may not be passed until November or December, leaving Delta with a difficult decision even if it does meet the other conditions to remain solvent. More likely, Delta will file for Chapter 11 as soon as it has closed the sale of ASA, concluded new credit card processing agreements and arranged debtor-in-possession financing.”