e424b2
CALCULATION
OF REGISTRATION FEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposed Maximum |
|
|
|
Proposed Maximum |
|
|
|
Amount of |
|
|
|
Title of Each Class of |
|
|
Amount to be |
|
|
|
Offering |
|
|
|
Aggregate |
|
|
|
Registration |
|
|
|
Securities to be Registered |
|
|
Registered |
|
|
|
Price per Unit |
|
|
|
Offering Price |
|
|
|
Fee(1) |
|
|
|
Pass Through Certificates, Series 2011-1B |
|
|
|
$102,000,000 |
|
|
|
|
100% |
|
|
|
|
$102,000,000 |
|
|
|
$ |
11,842.20 |
|
|
|
(1) |
|
The total registration fee of $11,842.20 is calculated in accordance with Rule 457(r) of the
Securities Act of 1933, as amended. |
Filed
Pursuant to Rule 424(b)(2)
Registration No. 333-167811
PROSPECTUS SUPPLEMENT
(To Prospectus Dated June 28, 2010)
$102,000,000
2011-1B Pass Through Trust
Pass Through Certificates, Series 2011-1B
Delta Air Lines, Inc. is creating a pass through trust that will issue Delta Air Lines,
Inc. Class B Pass Through Certificates, Series 2011-1. The Class B Certificates are being offered
pursuant to this prospectus supplement. Subject to the distribution provisions described herein,
the Class B Certificates generally will rank junior to the Class A Pass Through Certificates,
Series 2011-1. The Class A Certificates were, and the Class B Certificates will be, issued by
separate trusts. The Class A Certificates were originally issued on April 5, 2011 and are not being
offered pursuant to this prospectus supplement.
The Class B Certificates will represent interests in the assets of the related pass through
trust. The proceeds from the sale of the Class B Certificates will initially be held in escrow and
will thereafter be used by such pass through trust to acquire the related series of equipment notes
to be issued by Delta on a full recourse basis. Payments on the equipment notes held in such pass
through trust will be passed through to the holders of the Class B Certificates. Distributions on
the Class B Certificates will be subject to certain subordination provisions described herein. The
Class B Certificates do not represent interests in, or obligations of, Delta or any of its
affiliates.
The equipment notes expected to be held by the pass through trust for the Class B Certificates
will be issued for each of (a) ten Boeing 737-832 aircraft delivered new to Delta from 2000 to
2001, (b) twelve Boeing 757-232 aircraft delivered new to Delta from 1995 to 2001 and (c) four
Boeing 767-332ER aircraft delivered new to Delta in 1998. The equipment notes expected to be held
by the pass through trust for the Class A Certificates also will be issued for each such aircraft.
The equipment notes issued for each aircraft will be secured by a security interest in such
aircraft. With respect to the Class B Certificates, interest on the issued and outstanding
equipment notes will be payable semiannually on April 15 and October 15 of each year, commencing on
October 15, 2011, and the entire principal on such equipment notes is scheduled for payment on
October 15, 2014.
Natixis S.A., acting via its New York Branch, will provide a liquidity facility for the Class
B Certificates in an amount sufficient to make three semiannual interest distributions on the
outstanding balance of the Class B Certificates. Natixis S.A., acting via its New York Branch, also
provides a separate liquidity facility for the Class A Certificates.
The Class B Certificates will be subject to transfer restrictions. They may be sold only to
qualified institutional buyers, as defined in Rule 144A under the Securities Act of 1933, as
amended, for so long as they are outstanding.
The Class B Certificates will not be listed on any national securities exchange.
Investing in the Class B Certificates involves risks. See Risk Factors beginning on page S-18.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal
offense.
|
|
|
|
|
|
|
|
|
|
|
Aggregate Face |
|
|
|
Final Expected |
|
Price to |
Pass Through Certificates |
|
Amount |
|
Interest Rate |
|
Distribution Date |
|
Public(1) |
Class B |
|
$102,000,000 |
|
7.125% |
|
October 15, 2014
|
|
100% |
|
|
|
(1) |
|
Plus accrued interest, if any, from the date of issuance. |
The underwriter will purchase all of the Class B Certificates if any are purchased. The
aggregate proceeds from the sale of the Class B Certificates will be $102,000,000. Delta will pay
the underwriter a commission of $1,147,500. Delivery of the Class B Certificates in book-entry form
will be made on or about August 17, 2011 against payment in immediately available funds.
Book-Running Manager
Citigroup
The date
of this prospectus supplement is August 12, 2011.
We have not, and the underwriter has not, authorized anyone to provide you with information
other than the information contained in this prospectus supplement, the accompanying prospectus,
any related free writing prospectus issued by us (which we refer to as a company free writing
prospectus ) and the documents incorporated by reference in this prospectus supplement, the
accompanying prospectus or to which we have referred you. This prospectus supplement, the
accompanying prospectus and any related company free writing prospectus do not constitute an offer
to sell, or a solicitation of an offer to purchase, the securities offered by this prospectus
supplement, the accompanying prospectus and any related company free writing prospectus in any
jurisdiction to or from any person to whom or from whom it is unlawful to make such offer or
solicitation of an offer in such jurisdiction. You should not assume that the information contained
in this prospectus supplement, the accompanying prospectus and any related company free writing
prospectus or any document incorporated by reference is accurate as of any date other than the date
on the front cover of the applicable document. Neither the delivery of this prospectus supplement,
the accompanying prospectus and any related company free writing prospectus nor any distribution of
securities pursuant to this prospectus supplement and the accompanying prospectus shall, under any
circumstances, create any implication that there has been no change in our business, financial
condition, results of operations or prospects, or in the affairs of the Trusts, the Depositary or
the Liquidity Provider, since the date of this prospectus supplement.
TABLE OF CONTENTS
Prospectus Supplement
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
iii |
|
|
|
iii |
|
|
|
iv |
|
|
|
|
v |
|
|
|
|
S-1 |
|
|
|
|
S-1 |
|
|
|
|
S-3 |
|
|
|
|
S-4 |
|
|
|
|
S-6 |
|
|
|
|
S-8 |
|
|
|
|
S-16 |
|
|
|
|
S-18 |
|
|
|
|
S-18 |
|
|
|
|
S-23 |
|
|
|
|
S-25 |
|
|
|
|
S-31 |
|
|
|
|
S-32 |
|
|
|
|
S-33 |
|
|
|
|
S-34 |
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
S-34 |
|
|
|
|
S-36 |
|
|
|
|
S-39 |
|
|
|
|
S-39 |
|
|
|
|
S-40 |
|
|
|
|
S-41 |
|
|
|
|
S-43 |
|
|
|
|
S-44 |
|
|
|
|
S-45 |
|
|
|
|
S-45 |
|
|
|
|
S-49 |
|
|
|
|
S-51 |
|
|
|
|
S-51 |
|
|
|
|
S-52 |
|
|
|
|
S-55 |
|
|
|
|
S-57 |
|
i
|
|
|
|
|
|
|
|
S-57 |
|
|
|
|
S-57 |
|
|
|
|
S-57 |
|
|
|
|
S-58 |
|
|
|
|
S-59 |
|
|
|
|
S-59 |
|
|
|
|
S-61 |
|
|
|
|
S-61 |
|
|
|
|
S-62 |
|
|
|
|
S-63 |
|
|
|
|
S-63 |
|
|
|
|
S-64 |
|
|
|
|
S-64 |
|
|
|
|
S-64 |
|
|
|
|
S-65 |
|
|
|
|
S-67 |
|
|
|
|
S-69 |
|
|
|
|
S-70 |
|
|
|
|
S-71 |
|
|
|
|
S-71 |
|
|
|
|
S-74 |
|
|
|
|
S-74 |
|
|
|
|
S-78 |
|
|
|
|
S-78 |
|
|
|
|
S-78 |
|
|
|
|
S-79 |
|
|
|
|
S-80 |
|
|
|
|
S-80 |
|
|
|
|
S-80 |
|
|
|
|
S-82 |
|
|
|
|
S-83 |
|
|
|
|
S-83 |
|
|
|
|
S-83 |
|
|
|
|
S-85 |
|
|
|
|
|
|
|
|
|
S-85 |
|
|
|
|
S-86 |
|
|
|
|
S-87 |
|
|
|
|
S-88 |
|
|
|
|
S-88 |
|
|
|
|
S-89 |
|
|
|
|
S-90 |
|
|
|
|
S-91 |
|
|
|
|
S-91 |
|
|
|
|
S-98 |
|
|
|
|
S-99 |
|
|
|
|
S-99 |
|
|
|
|
S-100 |
|
|
|
|
S-101 |
|
|
|
|
S-102 |
|
|
|
|
S-104 |
|
|
|
|
S-105 |
|
|
|
|
S-105 |
|
|
|
|
S-105 |
|
|
|
|
S-106 |
|
|
|
|
S-106 |
|
|
|
|
S-107 |
|
|
|
|
S-108 |
|
|
|
|
S-109 |
|
|
|
|
S-109 |
|
|
|
|
|
|
|
|
Appendix I |
|
|
|
Appendix II |
|
|
|
Appendix III |
|
|
|
Appendix IV |
|
|
|
Appendix V |
|
ii
Prospectus
PRESENTATION OF INFORMATION
These offering materials consist of two documents: (a) this prospectus supplement, which
describes the terms of the Class B Certificates that we are currently offering, and (b) the
accompanying prospectus, which provides general information about us and our pass through
certificates, some of which may not apply to the Class B Certificates that we are currently
offering. The information in this prospectus supplement replaces any inconsistent information
included in the accompanying prospectus. To the extent the description of this offering varies
between this prospectus supplement and the accompanying prospectus, you should rely on the
information contained in or incorporated by reference in this prospectus supplement. See About
this Prospectus in the accompanying prospectus.
In this prospectus supplement, references to Delta, the Company, we, us and our
refer to Delta Air Lines, Inc. and our wholly-owned subsidiaries. With respect to information as of
dates prior to October 30, 2008, these references do not include our wholly-owned subsidiary,
Northwest Airlines, LLC, formerly known as Northwest Airlines Corporation (Northwest), or the
companies that were subsidiaries of Northwest at that time.
We have given certain capitalized terms specific meanings for purposes of this prospectus
supplement. The Index of Defined Terms attached as Appendix I to this prospectus supplement lists
the page in this prospectus supplement on which we have defined each such term.
At varying places in this prospectus supplement, we refer you to other sections for additional
information by indicating the caption heading of such other sections. The page on which each
principal caption included in this prospectus supplement can be found is listed in the foregoing
Table of Contents. All such cross-references in this prospectus supplement are to captions
contained in this prospectus supplement and not the accompanying prospectus, unless otherwise
stated.
FORWARD-LOOKING STATEMENTS
Statements in this prospectus supplement, the accompanying prospectus, any related company
free writing prospectus and the documents incorporated by reference herein and therein (or
otherwise made by us or on our behalf) that are not historical facts, including statements
regarding our estimates, expectations, beliefs, intentions, projections or strategies for the
future may be forward-looking statements as defined in the Private Securities Litigation Reform
Act of 1995. When used in this prospectus supplement, the accompanying prospectus, any related
company free writing prospectus and the documents incorporated herein and therein by reference, the
words expects, believes, plans, anticipates, and similar expressions are intended to
identify forward-looking statements. All forward-looking statements involve a
iii
number of risks and uncertainties that could cause actual results to differ materially from
the estimates, expectations, beliefs, intentions, projections and strategies reflected in or
suggested by the forward-looking statements. Known material risk factors applicable to Delta are
discussed under the heading Risk Factors, other than risk factors that could apply to any issuer
or offering. All forward-looking statements speak only as of the date made, and we undertake no
obligation to publicly update or revise any forward-looking statements to reflect events or
circumstances that may arise after the date of this prospectus supplement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the
Securities and Exchange Commission (the SEC). You may read and copy this information at the SECs
public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also
available to the public from the SECs website at http://www.sec.gov and at our website at
http://www.delta.com. The contents of our website are not incorporated into this prospectus
supplement.
This prospectus supplement is part of a registration statement that we have filed with the SEC
relating to the securities to be offered. This prospectus supplement does not contain all of the
information we have included in the registration statement and the accompanying exhibits and
schedules in accordance with the rules and regulations of the SEC, and we refer you to the omitted
information. The statements this prospectus supplement makes pertaining to the content of any
contract, agreement or other document that is an exhibit to the registration statement necessarily
are summaries of their material provisions and do not describe all exceptions and qualifications
contained in those contracts, agreements or documents. You should read those contracts, agreements
or documents for information that may be important to you. The registration statement, exhibits and
schedules are available at the SECs public reference room or through its website.
We incorporate by reference in this prospectus supplement certain documents that we file
with the SEC, which means:
|
|
|
we can disclose important information to you by referring you to those documents; |
|
|
|
|
information incorporated by reference is considered to be part of this prospectus
supplement, even though it is not repeated in this prospectus supplement; and |
|
|
|
|
information that we file later with the SEC will automatically update and supersede
this prospectus supplement. |
The following documents listed below that we have previously filed with the SEC (Commission
File Number 001-05424) are incorporated by reference (other than reports or portions thereof
furnished under Items 2.02 or 7.01 of Form 8-K):
|
|
|
Annual Report on Form 10-K for the fiscal year ended December 31, 2010; |
|
|
|
|
Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2011 and June
30, 2011; and |
|
|
|
|
Current Reports on Form 8-K filed on February 14, 2011, February 15, 2011, February 17,
2011, April 5, 2011, April 26, 2011, June 30, 2011 and July 21, 2011. |
iv
All documents filed by us under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, as amended (the Exchange Act) (other than reports or portions thereof furnished
under Items 2.02 or 7.01 of Form 8-K) from the date of this prospectus supplement and prior to the
termination of this offering shall also be deemed to be incorporated by reference in this
prospectus supplement.
Any party to whom this prospectus supplement is delivered may request a copy of these filings
(other than any exhibits unless specifically incorporated by reference into this prospectus), at no
cost, by writing or telephoning Delta at Delta Air Lines, Inc., Investor Relations, Dept. No. 829,
P.O. Box 20706, Atlanta, GA 30320, telephone no. (404) 715-2600.
INFORMATION RELATED TO CLASS A CERTIFICATES
The Class A Certificates were originally issued on April 5, 2011 and are not being offered
pursuant to this prospectus supplement. All statements relating to such Class A Certificates are
for informational purposes only.
v
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights basic information about our company and this offering. This summary
may not contain all of the information that may be important to you. You should read this entire
prospectus supplement, the accompanying prospectus and any related company free writing prospectus
carefully, including the section entitled Risk Factors in this prospectus supplement, as well as
the materials filed by Delta with the SEC that are considered to be a part of this prospectus
supplement, the accompanying prospectus and any related company free writing prospectus before
making an investment decision. See Where You Can Find More Information in this prospectus
supplement.
Summary of Terms of Certificates
|
|
|
|
|
|
|
Class A |
|
Class B |
|
|
Certificates(1) |
|
Certificates |
Aggregate face amount |
|
$292,750,000 |
|
$102,000,000 |
Interest rate |
|
5.30% |
|
7.125% |
Initial loan to Aircraft value ratio
(cumulative)(2)(3) |
|
52.4% |
|
70.6% |
Expected maximum loan to Aircraft value
ratio (cumulative)(3) |
|
52.4% |
|
70.6% |
Expected principal distribution window (in
years from issuance date)(4) |
|
1.0-8.0 |
|
3.2 |
Initial average life
(in years from issuance date)(4) |
|
5.4 |
|
3.2 |
Regular Distribution Dates |
|
April 15 and October 15 |
|
April 15 and October 15 |
Final expected Regular Distribution
Date(5) |
|
April 15, 2019 |
|
October 15, 2014 |
Final Legal Distribution Date(6) |
|
October 15, 2020 |
|
April 15, 2016 |
Minimum denomination(7) |
|
$2,000 |
|
$2,000 |
Section 1110 protection |
|
Yes |
|
Yes |
Liquidity Facility coverage |
|
3 semiannual interest payments |
|
3 semiannual interest payments |
|
|
|
(1) |
|
The Class A Certificates were issued on April 5, 2011. The Class A Certificates are not
being offered pursuant to this prospectus supplement. |
|
(2) |
|
These percentages are calculated assuming that each of the aircraft listed under
Equipment Notes and the Aircraft in this prospectus supplement summary has been subjected to
an Indenture and that the Trusts have purchased the related Equipment Notes for each such
aircraft as of October 15, 2011 (the first Regular Distribution Date that occurs after the
Outside Termination Date). In calculating these percentages, we have assumed that the
aggregate appraised value of all such aircraft is $558,831,974 as of such date. The appraisal
value is only an estimate and reflects certain assumptions. See Description of the Aircraft
and the Appraisals The Appraisals. |
|
(3) |
|
See Loan to Aircraft Value Ratios in this prospectus supplement summary for the method
and assumptions we used in calculating the loan to Aircraft value ratios and a discussion of
certain ways that such loan to Aircraft value ratios could change. |
|
(4) |
|
Measured, in the case of the Class A Certificates, from April 5, 2011 (the date of issuance
of the Class A Certificates) and, in the case of the Class B Certificates, from the Class B
Issuance Date. |
|
(5) |
|
Each Series of Equipment Notes issued with respect to an Aircraft will mature on the final
expected Regular Distribution Date for the Certificates to be issued by the Trust that is
expected to own such Equipment Notes. |
S-1
|
|
|
(6) |
|
The Final Legal Distribution Date for each of the Class A Certificates and the Class B
Certificates is the date which is 18 months from the final expected Regular Distribution Date
for that class of Certificates, which represents the period corresponding to the applicable
Liquidity Facility coverage of three successive semiannual interest payments. |
|
(7) |
|
The Class A Certificates were, and the Class B Certificates will be, issued in minimum
denominations of $2,000 (or such other denomination that is the lowest integral multiple of
$1,000 that is, at the time of issuance, equal to at least 1,000 euros) and integral multiples
of $1,000 in excess thereof. |
S-2
Equipment Notes and the Aircraft
The Trusts are expected to hold Equipment Notes issued for, and secured by, each of (i) ten
Boeing 737-832 aircraft delivered new to Delta from 2000 to 2001, (ii) twelve Boeing 757-232
aircraft delivered new to Delta from 1995 to 2001 and (iii) four Boeing 767-332ER aircraft
delivered new to Delta in 1998 (each such aircraft, an Aircraft, and, collectively, the
Aircraft). Each Aircraft is owned and is being operated by Delta. See Description of the
Aircraft and the Appraisals for a description of each Aircraft. Set forth below is certain
information about the Equipment Notes expected to be held in the Trusts and each of the Aircraft
that is expected to secure the Equipment Notes.
On and subject to the terms and conditions of the Note Purchase Agreement and the forms of
financing agreements attached to the Note Purchase Agreement, Delta agrees to enter into a secured
debt financing with respect to each Aircraft on or prior to October 14, 2011. See Description of
the Aircraft and the Appraisals Deliveries of Aircraft.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Principal |
|
Initial Principal |
|
|
|
|
|
|
|
|
|
|
|
Amount of |
|
Amount of |
|
|
|
|
|
Registration |
|
Manufacturers |
|
Month of |
|
Series A |
|
Series B |
|
Appraised |
Aircraft Type |
|
Number |
|
Serial Number |
|
Delivery |
|
Equipment Notes |
|
Equipment Notes |
|
Value(1) |
|
Boeing 737-832 |
|
N3737C |
|
30799 |
|
November 2000 |
|
$ |
12,643,000 |
|
|
$ |
4,405,000 |
|
|
$ |
24,718,667 |
|
Boeing 737-832 |
|
N3738B |
|
30382 |
|
December 2000 |
|
|
12,450,000 |
|
|
|
4,338,000 |
|
|
|
24,342,333 |
|
Boeing 737-832 |
|
N3739P |
|
30541 |
|
December 2000 |
|
|
12,480,000 |
|
|
|
4,348,000 |
|
|
|
24,399,667 |
|
Boeing 737-832 |
|
N3740C |
|
30800 |
|
December 2000 |
|
|
12,510,000 |
|
|
|
4,359,000 |
|
|
|
24,459,000 |
|
Boeing 737-832 |
|
N3741S |
|
30487 |
|
January 2001 |
|
|
12,889,000 |
|
|
|
4,491,000 |
|
|
|
25,199,667 |
|
Boeing 737-832 |
|
N3742C |
|
30835 |
|
February 2001 |
|
|
12,865,000 |
|
|
|
4,483,000 |
|
|
|
25,153,333 |
|
Boeing 737-832 |
|
N3743H |
|
30836 |
|
February 2001 |
|
|
12,879,000 |
|
|
|
4,488,000 |
|
|
|
25,181,000 |
|
Boeing 737-832 |
|
N3744F |
|
30837 |
|
May 2001 |
|
|
13,001,000 |
|
|
|
4,530,000 |
|
|
|
25,418,667 |
|
Boeing 737-832 |
|
N3745B |
|
32373 |
|
June 2001 |
|
|
13,027,000 |
|
|
|
4,537,000 |
|
|
|
25,467,000 |
|
Boeing 737-832 |
|
N3747D |
|
32374 |
|
May 2001 |
|
|
12,914,000 |
|
|
|
4,499,000 |
|
|
|
25,248,667 |
|
Boeing 757-232 |
|
N685DA |
|
27588 |
|
March 1995 |
|
|
6,920,000 |
|
|
|
2,410,000 |
|
|
|
13,530,000 |
|
Boeing 757-232 |
|
N686DA |
|
27589 |
|
September 1995 |
|
|
7,827,000 |
|
|
|
2,727,000 |
|
|
|
15,303,667 |
|
Boeing 757-232 |
|
N687DL |
|
27586 |
|
May 1998 |
|
|
9,128,000 |
|
|
|
3,180,000 |
|
|
|
17,847,333 |
|
Boeing 757-232 |
|
N688DL |
|
27587 |
|
May 1998 |
|
|
7,808,000 |
|
|
|
2,720,000 |
|
|
|
15,265,000 |
|
Boeing 757-232 |
|
N689DL |
|
27172 |
|
June 1998 |
|
|
9,201,000 |
|
|
|
3,206,000 |
|
|
|
17,990,000 |
|
Boeing 757-232 |
|
N690DL |
|
27585 |
|
June 1998 |
|
|
8,281,000 |
|
|
|
2,886,000 |
|
|
|
16,191,000 |
|
Boeing 757-232 |
|
N692DL |
|
29724 |
|
September 1998 |
|
|
8,399,000 |
|
|
|
2,927,000 |
|
|
|
16,422,000 |
|
Boeing 757-232 |
|
N693DL |
|
29725 |
|
October 1998 |
|
|
8,045,000 |
|
|
|
2,803,000 |
|
|
|
15,729,333 |
|
Boeing 757-232 |
|
N694DL |
|
29726 |
|
November 1998 |
|
|
8,164,000 |
|
|
|
2,845,000 |
|
|
|
15,962,000 |
|
Boeing 757-232 |
|
N695DL |
|
29727 |
|
December 1998 |
|
|
8,235,000 |
|
|
|
2,869,000 |
|
|
|
16,100,000 |
|
Boeing 757-232 |
|
N6714Q |
|
30485 |
|
December 2000 |
|
|
9,549,000 |
|
|
|
3,327,000 |
|
|
|
18,669,000 |
|
Boeing 757-232 |
|
N6715C |
|
30486 |
|
February 2001 |
|
|
9,765,000 |
|
|
|
3,403,000 |
|
|
|
19,093,000 |
|
Boeing 767-332ER |
|
N169DZ |
|
29689 |
|
June 1998 |
|
|
15,641,000 |
|
|
|
5,449,000 |
|
|
|
30,580,000 |
|
Boeing 767-332ER |
|
N171DZ |
|
29690 |
|
September 1998 |
|
|
15,968,000 |
|
|
|
5,564,000 |
|
|
|
31,220,000 |
|
Boeing 767-332ER |
|
N172DZ |
|
29691 |
|
September 1998 |
|
|
15,963,000 |
|
|
|
5,562,000 |
|
|
|
31,210,000 |
|
Boeing 767-332ER |
|
N173DZ |
|
29692 |
|
November 1998 |
|
|
16,198,000 |
|
|
|
5,644,000 |
|
|
|
31,670,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
|
$ |
292,750,000 |
|
|
$ |
102,000,000 |
|
|
$ |
572,370,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The appraised value of each Aircraft set forth above is the lesser of the average and
median appraised values of such Aircraft as appraised by three independent appraisal and
consulting firms (Aircraft Information Services, Inc. (AISI), BK Associates, Inc. (BK) and
Morten Beyer & Agnew, Inc. (MBA, and together with AISI and BK, the Appraisers)). Such
appraisals indicate appraised base value, adjusted for the maintenance status of such Aircraft
around the time of such appraisals (but assuming the related engines are in a half-time
condition). The AISI appraisal is dated March 10, 2011; the BK appraisal is dated March 16,
2011; and the MBA appraisal is dated March 15, 2011. The Appraisers based their appraisals on
varying assumptions (which may not reflect current market conditions) and methodologies. See
Description of the Aircraft and the Appraisals The Appraisals. An appraisal is only an
estimate of value and you should not rely on any appraisal as a measure of realizable value.
See Risk Factors Risk Factors Relating to the Class B Certificates and the Offering
Appraisals should not be relied upon as a measure of realizable value of the Aircraft. |
S-3
Loan to Aircraft Value Ratios
The following table provides loan to Aircraft value ratios (LTVs) for each class of
Certificates, assuming that each of the Aircraft has been subjected to an Indenture and that the
Trusts have purchased the related Equipment Notes for each such Aircraft, as of October 15, 2011
(the first Regular Distribution Date that occurs after the Class B Issuance Date) and each Regular
Distribution Date thereafter. The LTVs for any period prior to October 15, 2011 are not included,
since during such period all of the Equipment Notes expected to be acquired by the Trusts and the
related Aircraft will not be included in the calculation. The table is not a forecast or prediction
of expected or likely LTVs, but simply a mathematical calculation based upon one set of
assumptions. See Risk Factors Risk Factors Relating to the Class B Certificates and the
Offering Appraisals should not be relied upon as a measure of realizable value of the Aircraft.
We compiled the following table on an aggregate basis. However, the Equipment Notes issued
under an Indenture are entitled only to certain specified cross-collateralization provisions as
described under Description of the Equipment Notes Security. The relevant LTVs in a default
situation for the Equipment Notes issued under a particular Indenture would depend on various
factors, including the extent to which the debtor or trustee in bankruptcy agrees to perform
Deltas obligations under the Indentures. Therefore, the following aggregate LTVs are presented for
illustrative purposes only and should not be interpreted as indicating the degree of
cross-collateralization available to the holders of the Certificates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pool Balance(2) |
|
LTV(3) |
|
|
Aggregate |
|
|
|
|
|
|
|
|
Regular |
|
Assumed |
|
Class A |
|
Class B |
|
Class A |
|
Class B |
Distribution Date |
|
Aircraft Value(1) |
|
Certificates |
|
Certificates |
|
Certificates |
|
Certificates |
October 15, 2011 |
|
$ |
558,831,974 |
|
|
$ |
292,750,000 |
|
|
$ |
102,000,000 |
|
|
|
52.4 |
% |
|
|
70.6 |
% |
April 15, 2012 |
|
|
545,293,615 |
|
|
|
272,525,000 |
|
|
|
102,000,000 |
|
|
|
50.0 |
|
|
|
68.7 |
|
October 15, 2012 |
|
|
531,755,256 |
|
|
|
253,300,000 |
|
|
|
102,000,000 |
|
|
|
47.6 |
|
|
|
66.8 |
|
April 15, 2013 |
|
|
518,216,897 |
|
|
|
235,300,000 |
|
|
|
102,000,000 |
|
|
|
45.4 |
|
|
|
65.1 |
|
October 15, 2013 |
|
|
503,876,298 |
|
|
|
223,300,000 |
|
|
|
102,000,000 |
|
|
|
44.3 |
|
|
|
64.6 |
|
April 15, 2014 |
|
|
488,269,192 |
|
|
|
211,300,000 |
|
|
|
102,000,000 |
|
|
|
43.3 |
|
|
|
64.2 |
|
October 15, 2014 |
|
|
472,662,086 |
|
|
|
199,300,000 |
|
|
|
0 |
|
|
|
42.2 |
|
|
|
|
|
April 15, 2015 |
|
|
457,054,980 |
|
|
|
187,300,000 |
|
|
|
0 |
|
|
|
41.0 |
|
|
|
|
|
October 15, 2015 |
|
|
441,315,227 |
|
|
|
175,300,000 |
|
|
|
0 |
|
|
|
39.7 |
|
|
|
|
|
April 15, 2016 |
|
|
424,396,148 |
|
|
|
163,300,000 |
|
|
|
0 |
|
|
|
38.5 |
|
|
|
|
|
October 15, 2016 |
|
|
406,437,343 |
|
|
|
152,300,000 |
|
|
|
0 |
|
|
|
37.5 |
|
|
|
|
|
April 15, 2017 |
|
|
388,478,538 |
|
|
|
141,300,000 |
|
|
|
0 |
|
|
|
36.4 |
|
|
|
|
|
October 15, 2017 |
|
|
370,519,733 |
|
|
|
130,300,000 |
|
|
|
0 |
|
|
|
35.2 |
|
|
|
|
|
April 15, 2018 |
|
|
352,560,928 |
|
|
|
119,300,000 |
|
|
|
0 |
|
|
|
33.8 |
|
|
|
|
|
October 15, 2018 |
|
|
333,799,883 |
|
|
|
108,300,000 |
|
|
|
0 |
|
|
|
32.4 |
|
|
|
|
|
April 15, 2019 |
|
|
313,772,331 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In calculating the aggregate Assumed Aircraft Value, we assumed that the appraised value of
each Aircraft determined as described under Description of the Aircraft and the Appraisals
declines in accordance with the Depreciation Assumption described under Description of the
Equipment Notes Loan to Value Ratios of Equipment Notes. Other rates or methods of
depreciation could result in materially different LTVs. We cannot assure you that the
depreciation rate and method assumed for purposes of the above table are the ones most likely
to occur or predict the actual future value of any Aircraft. See Risk Factors Risk Factors
Relating to the Class B Certificates and the Offering Appraisals should not be relied upon
as a measure of realizable value of the Aircraft. |
|
(2) |
|
The pool balance for each class of Certificates indicates, as of any date, after giving
effect to any principal distributions expected to be made on such date, the portion of the
original face amount of such class of Certificates that has not been distributed to
Certificateholders. |
|
(3) |
|
We obtained the LTVs for each class of Certificates for each Regular Distribution Date by
dividing (i) the expected outstanding pool balance of such class of Certificates (together, in
the case of the Class B Certificates,
with the expected outstanding pool balance of the Class A Certificates) after giving effect to
the principal |
S-4
|
|
|
|
|
distributions expected to be made on such date, by (ii) the aggregate Assumed
Aircraft Value of all of the Aircraft expected to be included in the collateral pool on such
date based on the assumptions described above. The outstanding pool balances and LTVs for any
date will change if any Equipment Notes are redeemed or purchased, if a default in payment on
any Equipment Notes occurs, or if any Aircraft is not subjected to an Indenture and the
related Equipment Notes are not acquired by the Trusts, in each case on or prior to the
Outside Termination Date. |
S-5
Cash Flow Structure
This diagram illustrates the structure for the offering of the Certificates and certain cash
flows.
|
|
|
(1) |
|
Delta will issue Series A Equipment Notes and Series B Equipment Notes in respect of each
Aircraft. The Equipment Notes will be issued under a separate Indenture with respect to each
Aircraft. |
|
(2) |
|
The separate Liquidity Facility for each of the Class A Certificates and the Class B
Certificates is expected to cover up to three semiannual interest distributions on the Class A
Certificates and the Class B Certificates, respectively, except that the Liquidity Facilities
will not cover interest on Deposits. |
|
(3) |
|
The proceeds from the sale of the Class B Certificates will initially be held in escrow and
deposited with the Depositary, as are the proceeds from the sale of the Class A Certificates,
pending the financing of each Aircraft under an Indenture. The Depositary will hold such funds
as interest-bearing Deposits. Each Trust will withdraw funds from the Deposits relating to
such Trust to purchase from Delta the related series of Equipment Notes from time to time as
each Aircraft is subjected to the related Indenture. The Scheduled Payments of interest on the
Equipment Notes held by, and on the Deposits relating to, a Trust, taken together, will be
sufficient to pay accrued interest on the outstanding Certificates of such Trust. Under
certain circumstances, funds in Deposits
relating to a Trust will be withdrawn prior to the Delivery Period Termination Date and
distributed to the holders of Certificates of such Trust, together with accrued and unpaid
interest thereon, but without any premium. See |
S-6
|
|
|
|
|
Description of the Deposit Agreements Other
Withdrawals and Return of Deposits. If any funds remain as Deposits with respect to any Trust
on the Delivery Period Termination Date, such remaining funds will be distributed, with
accrued and unpaid interest on such remaining funds, but without any premium, to the holders
of the related class of Certificates. See Description of the Deposit Agreements Other
Withdrawals and Return of Deposits. No interest will accrue with respect to the Deposits
after they have been fully withdrawn. |
S-7
The Offering
|
|
|
Trusts
|
|
The Class B Trust will be formed pursuant to a trust
supplement entered into between Delta and U.S. Bank Trust
National Association to a basic pass through trust
agreement between Delta and U.S. Bank Trust National
Association (as successor trustee to State Street Bank
and Trust Company of Connecticut, National Association),
as Trustee. The Class A Trust was previously formed
pursuant to a separate trust supplement to such basic
pass through trust agreement. The Class A Certificates
represent, and the Class B Certificates will represent,
fractional undivided interests in the related Trust. |
|
|
|
Certificates Offered
|
|
Class B Certificates. |
|
|
|
Previously Issued Certificates
|
|
The Class A Certificates were previously issued on April
5, 2011. We are not offering the Class A Certificates
pursuant to this prospectus supplement. |
|
|
|
Use of Proceeds
|
|
The proceeds from the sale of the Class B Certificates
will initially be held in escrow and deposited with the
Depositary, pending the financing of each Aircraft under
an Indenture. The Class B Trust will withdraw funds from
such escrow to acquire from Delta the Series B Equipment
Notes to be issued as each Aircraft is subjected to the
related Indenture. |
|
|
|
|
|
The Series B Equipment Notes will be full recourse
obligations of Delta. The Aircraft are currently subject
to liens under existing financings comprising a prior
Delta enhanced equipment trust certificate transaction.
After the Aircraft are released from the liens of such
existing financings, the Aircraft are expected to be
subjected to the liens of the Indentures securing the
Series A Equipment Notes and Series B Equipment Notes.
Delta will use the proceeds from the issuance of the
Series B Equipment Notes issued with respect to the
Aircraft to reimburse itself, in part, for the repayment
at maturity of the prior enhanced equipment trust
certificate transaction in September 2011. Delta will use
any proceeds not used in connection with the foregoing to
pay fees and expenses related to this offering and for
general corporate purposes. |
|
|
|
Subordination Agent, Trustee,
Paying Agent and Loan Trustee
|
|
U.S. Bank Trust National Association. |
|
|
|
Escrow Agent
|
|
U.S. Bank National Association. |
|
|
|
Depositary
|
|
The Bank of New York Mellon. |
|
|
|
Liquidity Provider for the
Class A Certificates and the
Class B Certificates
|
|
Initially, Natixis S.A., acting via its New York Branch. |
|
|
|
Trust Property
|
|
The property of each Trust will include: |
|
|
|
subject to the Intercreditor Agreement, the
Equipment Notes acquired by such Trust prior to the
Delivery Period Termination Date, all monies at any time
paid thereon and all monies due and to become |
S-8
|
|
|
due thereunder; |
|
|
|
|
the rights of such Trust to acquire the related
series of Equipment Notes under the Note Purchase
Agreement; |
|
|
|
|
the rights of such Trust under the applicable
Escrow Agreement to request the Escrow Agent to withdraw
from the Depositary funds sufficient to enable such Trust
to purchase the related series of Equipment Notes upon
the financing of an Aircraft under the related Indenture
prior to the Delivery Period Termination Date; |
|
|
|
|
the rights of such Trust under the Intercreditor
Agreement (including all monies receivable in respect of
such rights); |
|
|
|
|
all monies receivable under the separate
Liquidity Facility for such Trust; and |
|
|
|
|
funds from time to time deposited with the
applicable Trustee in accounts relating to such Trust. |
|
|
|
Regular Distribution Dates
|
|
April 15 and October 15 of each year, commencing on
October 15, 2011. |
|
|
|
Record Dates
|
|
The fifteenth day preceding the related Distribution Date. |
|
|
|
Distributions
|
|
The Trustee of each Trust will distribute payments of
principal, Make-Whole Amount (if any) and interest
received on the Equipment Notes held in such Trust to the
holders of the Certificates of such Trust, subject to the
subordination provisions set forth in the Intercreditor
Agreement. |
|
|
|
|
|
Subject to the subordination provisions set forth in the
Intercreditor Agreement, |
|
|
|
Scheduled Payments of principal and interest made
on the Equipment Notes will be distributed on the
applicable Regular Distribution Dates; and |
|
|
|
|
payments in respect of, or any proceeds of, any
Equipment Notes or the Collateral under any Indenture,
including payments resulting from any early redemption of
such Equipment Notes, will be distributed on a Special
Distribution Date after not less than 15 days notice to
Certificateholders. |
|
|
|
|
|
See Escrowed Funds and Withdrawal and Return of
Escrowed Funds below for a description of various
distributions relating to the Deposits under certain
circumstances. |
|
|
|
Intercreditor Agreement
|
|
The Class A Trustee, the Class A Liquidity Provider and
the Subordination Agent entered into an intercreditor
agreement on April 5, 2011. Each party thereto, together
with Delta, the Class B Trustee and the Class B Liquidity
Provider, will enter into an amendment thereto whereby
the Class B Trustee and the Class B Liquidity Provider
will each become a party to the Intercreditor Agreement.
The Intercreditor Agreement prescribes how payments made
on the Equipment Notes held by the Subordination Agent
and made under each Liquidity Facility will be
distributed. The Intercreditor Agreement also sets forth
agreements |
S-9
|
|
|
|
|
among the Trustees and the Liquidity Providers
relating to who will control the exercise of remedies
under the Equipment Notes and the Indentures. |
|
|
|
Subordination
|
|
Under the Intercreditor Agreement, after payment of
certain fees and expenses, distributions on the
Certificates generally will be made in the following
order: |
|
|
|
first, to the holders of the Class A Certificates
to make distributions in respect of interest on the Class
A Certificates; |
|
|
|
|
second, to the holders of the Class B
Certificates to make distributions in respect of interest
on the Eligible B Pool Balance; |
|
|
|
|
third, to the holders of the Class A Certificates
to make distributions in respect of the Pool Balance of
the Class A Certificates; |
|
|
|
|
fourth, to the holders of the Class B
Certificates to make distributions in respect of interest
on the Pool Balance of the Class B Certificates not
previously distributed under clause second above; and |
|
|
|
|
fifth, to the holders of the Class B Certificates
to make distributions in respect of the Pool Balance of
the Class B Certificates. |
|
|
|
|
|
Certain distributions to the Liquidity Providers will be
made prior to distributions on the Class A Certificates
and Class B Certificates, as discussed under Description
of the Intercreditor Agreement Priority of
Distributions. |
|
|
|
Control of Loan Trustee
|
|
The holders of at least a majority of the outstanding
principal amount of Equipment Notes issued under each
Indenture will be entitled to direct the Loan Trustee
under such Indenture in taking action as long as no
Indenture Event of Default has occurred and is continuing
thereunder. If an Indenture Event of Default has occurred
and is continuing under an Indenture, subject to certain
conditions, the Controlling Party will be entitled to
direct the Loan Trustee under such Indenture in taking
action (including in exercising remedies, such as
accelerating such Equipment Notes or foreclosing the lien
on the Aircraft with respect to which such Equipment
Notes were issued). |
|
|
|
|
|
The Controlling Party will be: |
|
|
|
if Final Distributions have not been paid in full
to the holders of the Class A Certificates, the Class A
Trustee; |
|
|
|
|
if Final Distributions have been paid in full to
the holders of the Class A Certificates, but not to the
holders of the Class B Certificates, the Class B Trustee;
and |
|
|
|
|
under certain circumstances, and notwithstanding
the foregoing, the Liquidity Provider with the largest
amount owed to it. |
|
|
|
Limitation on Sale of
Aircraft or Equipment Notes
|
|
In exercising remedies during the nine months after the
earlier of (a) the acceleration of the Equipment Notes
issued pursuant to any Indenture and |
S-10
|
|
|
|
|
(b) the bankruptcy
or insolvency of Delta, the Controlling Party may not,
without the consent of each Trustee (other than the
Trustee of any Trust all of the Certificates of which are
held or beneficially owned by Delta or Deltas
affiliates), direct the sale of such Equipment Notes or
the Aircraft subject to the lien of such Indenture for
less than certain specified minimum amounts. See
Description of the Intercreditor Agreement
Intercreditor Rights Limitation on Exercise of
Remedies for a description of such minimum amounts and
certain other limitations on the exercise of remedies. |
|
|
|
Right to Buy Class A
Certificates
|
|
If Delta is in bankruptcy and certain other specified
events have occurred, the Class B Certificateholders
(other than Delta or any of its affiliates), will have
the right to purchase all, but not less than all, of the
Class A Certificates. |
|
|
|
|
|
The purchase price for the Class A Certificates will be
the outstanding Pool Balance of such Class A Certificates
plus accrued and undistributed interest, without any
premium, but including any other amounts then due and
payable to the Class A Certificateholders. |
|
|
|
Liquidity Facilities
|
|
Under the Liquidity Facility for each of the Class A
Trust and Class B Trust, the applicable Liquidity
Provider is required, if necessary, to make advances in
an aggregate amount sufficient to pay interest
distributions on the applicable Certificates on up to
three successive semiannual Regular Distribution Dates
(without regard to any expected future distributions of
principal on such Certificates) at the applicable
interest rate for such Certificates. Drawings under the
Liquidity Facilities cannot be used to pay any amount in
respect of the Certificates other than such interest and
will not cover interest payable on amounts held in escrow
as Deposits with the Depositary. See Description of the
Liquidity Facilities for a description of the terms of
the Liquidity Facilities, including the threshold rating
requirements applicable to the Liquidity Providers. |
|
|
|
|
|
Notwithstanding the subordination provisions applicable
to the Certificates under the Intercreditor Agreement,
the Class A Certificateholders and the Class B
Certificateholders will be entitled to receive and retain
the proceeds of drawings under the Class A Liquidity
Facility and the Class B Liquidity Facility,
respectively. |
|
|
|
|
|
Upon each drawing under any Liquidity Facility to pay
interest distributions on the related Certificates, the
Subordination Agent will be obligated to reimburse the
applicable Liquidity Provider for the amount of such
drawing, together with interest on that drawing. Such
reimbursement obligation and all interest, fees and other
amounts owing to the Liquidity Provider under each
Liquidity Facility and certain other agreements will rank
equally with comparable obligations relating to the other
Liquidity Facility and will rank senior to all of the
Certificates in right of payment. |
|
|
|
Escrowed Funds
|
|
Funds in escrow for the Certificateholders of each Trust
will be held by the Depositary as Deposits relating to
such Trust. Subject to certain conditions, each Trustee
may withdraw these funds from time to time to purchase
the related series of Equipment Notes in respect of an
Aircraft prior to the Delivery Period Termination Date.
On each Regular Distribution Date, the Depositary will
pay interest accrued on the Deposits relating to each
Trust at a rate per annum equal to the interest |
S-11
|
|
|
|
|
rate
applicable to the Certificates issued by such Trust. The
Deposits relating to each Trust and interest paid thereon
will not be subject to the subordination provisions under
the Intercreditor Agreement. The Deposits cannot be used
to pay any other amount in respect of the Certificates.
See Description of the Deposit Agreements for a
description of the terms of the deposit arrangements,
including the threshold rating requirement applicable to
the Depositary. |
|
|
|
Withdrawal and Return of
Escrowed Funds
|
|
Under certain circumstances, less than all of the
Deposits held in escrow may have been used to purchase
Equipment Notes to be issued with respect to the Aircraft
by the Delivery Period Termination Date. This could occur
because of delays in the release of liens under the
Existing Financings with respect to the Aircraft or
because of other reasons. See Description of the
Certificates Obligation to Purchase Equipment Notes.
If any funds remain as Deposits with respect to any Trust
as of the Delivery Period Termination Date, such
remaining funds will be withdrawn by the Escrow Agent and
distributed by the Paying Agent, with accrued and unpaid
interest on such remaining funds, but without any
premium, to the Certificateholders of such Trust on a
date no earlier than 15 days after the Paying Agent has
received notice of the event requiring such distribution
or, under certain circumstances, such remaining funds
will be automatically returned by the Depositary to the
Paying Agent on the Outside Termination Date, and the
Paying Agent will distribute such funds to such
Certificateholders as promptly as practicable thereafter.
In addition, if a Triggering Event occurs prior to the
Delivery Period Termination Date, any Deposits held in
escrow will also be withdrawn and distributed to the
applicable Certificateholders. See Description of the
Deposit Agreements Other Withdrawals and Return of
Deposits. If any of certain events of loss occurs with
respect to an Aircraft before such Aircraft is financed
pursuant to this offering, any Deposits relating to such
Aircraft held in escrow with respect to each Trust will
be similarly withdrawn and distributed to the
Certificateholders of such Trust. See Description of the
Deposit Agreements Other Withdrawals and Return of
Deposits. |
|
|
|
Obligation to Purchase
Equipment Notes
|
|
The Trustees will be obligated to purchase the Equipment
Notes issued with respect to each Aircraft prior to the
Delivery Period Termination Date pursuant to the terms
and conditions of the Note Purchase Agreement and the
forms of financing agreements attached to the Note
Purchase Agreement. On and subject to the terms and
conditions of the Note Purchase Agreement and the forms
of financing agreements attached to the Note Purchase
Agreement, Delta agrees to enter into a secured debt
financing with respect to each Aircraft on or prior to
October 14, 2011 with the relevant parties pursuant to
financing agreements that are substantially in the forms
attached to the Note Purchase Agreement. Delta may use
financing agreements modified in any material respect
from the forms attached to the Note Purchase Agreement so
long as Delta obtains written confirmation from each
Rating Agency to the effect that the use of such modified
financing agreements will not result in a withdrawal,
suspension or downgrading of the rating of each class of
Certificates then rated by such Rating Agency. The terms
of such financing agreements also must in any event
comply with the Required Terms set forth in the Note
Purchase Agreement. In addition, Delta, subject to
certain exceptions, is obligated to certify to the
Trustees that any substantive |
S-12
|
|
|
|
|
modifications do not
materially and adversely affect the Certificateholders or
any Liquidity Provider. |
|
|
|
|
|
Under the Note Purchase Agreement, the Trustees will not
be obligated to purchase the Equipment Notes to be issued
with respect to any Aircraft not yet financed if a
Triggering Event occurs or certain specified conditions
are not met. In addition, if any of certain events of
loss occurs with respect to an Aircraft before such
Aircraft is financed pursuant to this offering, the
Trustees will not be obligated to purchase the Equipment
Notes to be issued with respect to such Aircraft. The
Trustees will have no right or obligation to purchase the
Equipment Notes to be issued with respect to any Aircraft
after the Delivery Period Termination Date. See
Description of the Certificates Obligation to
Purchase Equipment Notes. |
|
|
|
Equipment Notes |
|
|
|
|
|
(a) Issuer
|
|
Under each Indenture, Delta will issue Series A Equipment
Notes and Series B Equipment Notes with respect to an
Aircraft, which will be acquired, respectively, by the
Class A Trust and the Class B Trust. |
|
|
|
(b) Interest
|
|
The Series B Equipment Notes will accrue interest at the
rate per annum for the Class B Certificates set forth on
the cover page of this prospectus supplement, and the
Series A Equipment Notes will accrue interest at the rate
per annum of 5.30%. Interest on the Equipment Notes will
be payable on April 15 and October 15, commencing on
October 15, 2011 and will be calculated on the basis of a
360-day year consisting of twelve 30-day months. |
|
|
|
(c) Principal
|
|
The entire principal amount of the issued and outstanding
Series B Equipment Notes is scheduled to be paid on
October 15, 2014. Principal payments on the issued and
outstanding Series A Equipment Notes are scheduled to be
paid in specified amounts on April 15 and October 15 in
certain years, commencing on April 15, 2012. See
Description of the Equipment Notes Principal and
Interest Payments. |
|
|
|
(d) Rankings
|
|
The following subordination provisions will be applicable
to the Equipment Notes issued under the Indentures: |
|
|
|
the indebtedness evidenced by the Series B
Equipment Notes issued under an Indenture will be, to the
extent and in the manner provided in such Indenture,
subordinate and subject in right of payment to the Series
A Equipment Notes issued under such Indenture; and |
|
|
|
|
the indebtedness evidenced by the Series A
Equipment Notes and the Series B Equipment Notes issued
under any Indenture will be, to the extent and in the
manner provided in the other Indentures, subordinate and
subject in right of payment under such other Indentures
to the Equipment Notes issued under such other
Indentures. |
|
|
|
|
|
By virtue of the Intercreditor Agreement, all of the
Equipment Notes held by the Subordination Agent will be
effectively cross-subordinated. This means that payments
received on Series B Equipment Notes issued in respect of
one Aircraft may be applied in accordance with the
priority of |
S-13
|
|
|
|
|
payment provisions set forth in the
Intercreditor Agreement to make distributions on the
Class A Certificates. See Description of the
Intercreditor Agreement Priority of Distributions. |
|
|
|
(e) Redemption
|
|
Aircraft Event of Loss. Under an Indenture, if an Event
of Loss occurs with respect to an Aircraft, Delta will
either: |
|
|
|
substitute for such Aircraft under the related
financing agreements an aircraft meeting certain
requirements; or |
|
|
|
|
redeem all of the Equipment Notes issued with
respect to such Aircraft. |
|
|
|
|
|
The redemption price in such case will
be the unpaid principal amount of such
Equipment Notes to be redeemed,
together with accrued and unpaid
interest, but without any premium. |
|
|
|
|
|
Optional Redemption. Delta may elect to
redeem at any time prior to maturity
all of the Equipment Notes issued with
respect to an Aircraft; provided that
all outstanding Equipment Notes issued
with respect to all other Aircraft are
simultaneously redeemed. In addition,
Delta may elect to redeem the Series B
Equipment Notes with respect to all
Aircraft in connection with a
refinancing of such series or without
refinancing. See Possible Refinancing
of Class B Certificates. The
redemption price in each such case will
be the unpaid principal amount of such
Equipment Notes being redeemed,
together with accrued and unpaid
interest, plus the Make-Whole Amount
(if any). See Description of the
Equipment Notes Redemption. |
|
|
|
(f) Security and cross-
collateralization
|
|
The Equipment Notes issued with respect
to each Aircraft will be secured by,
among other things, a security interest
in such Aircraft. |
|
|
|
|
|
In addition, the Equipment Notes will
be cross-collateralized to the extent
described under Description of the
Equipment Notes Security and
Description of the Equipment Notes
Subordination. This means, among other
things, that any proceeds from the sale
of any Aircraft by the Loan Trustee or
other exercise of remedies under the
related Indenture following an
Indenture Event of Default under such
Indenture will (after all of the
Equipment Notes issued under such
Indenture have been paid off, and
subject to the provisions of Title 11
of the United States Code, the U.S.
Bankruptcy Code (the Bankruptcy
Code)) be available for application to
shortfalls with respect to the
Equipment Notes issued under the other
Indentures and the other obligations
secured by the other Indentures that
are due at the time of such
application. In the absence of any such
shortfall at the time of such
application, excess proceeds will be
held by the Loan Trustee under such
Indenture as additional collateral for
the Equipment Notes issued under each
of the other Indentures and will be
applied to the payments in respect of
the Equipment Notes issued under such
other Indentures as they come due.
However, if any Equipment Note ceases
to be held by the Subordination Agent
(as a result of sale during the
exercise of remedies by the Controlling
Party or otherwise), such Equipment
Note will cease to be entitled to the
benefits of cross-collateralization.
Any cash Collateral held as a result of
the cross-collateralization of the
Equipment Notes would not be entitled
to the |
S-14
|
|
|
|
|
benefits of Section 1110 of the
Bankruptcy Code (Section 1110). |
|
|
|
|
|
If the Equipment Notes issued under any
Indenture are repaid in full in the
case of an Event of Loss with respect
to the applicable Aircraft, the lien on
such Aircraft under such Indenture will
be released. Once the lien on any
Aircraft is released, such Aircraft
will no longer secure the amounts that
may be owing under any Indenture. |
|
|
|
(g) Cross-default
|
|
There will be cross-default provisions
in the Indentures. This means that if
the Equipment Notes issued with respect
to one Aircraft are in a continuing
default, the Equipment Notes issued
with respect to the remaining Aircraft
will also be in default, and remedies
will be exercisable with respect to all
Aircraft. |
|
|
|
(h) Section 1110 Protection
|
|
Deltas internal counsel will provide
an opinion to the Class B Trustee that
the benefits of Section 1110 will be
available for each of the Aircraft. |
|
|
|
Certain U.S. Federal Income Tax
Consequences
|
|
The Class B Trust itself will not be
subject to U.S. federal income tax. See
Certain U.S. Federal Income Tax
Consequences. |
|
|
|
Certain ERISA Considerations
|
|
Each person who acquires a Class B
Certificate or an interest therein will
be deemed to have represented that
either: |
|
|
|
no assets of a Plan or of any
trust established with respect to a
Plan have been used to acquire such
Class B Certificate or an interest
therein; or |
|
|
|
|
the purchase and holding of
such Class B Certificate or an interest
therein by such person are exempt from
the prohibited transaction restrictions
of ERISA and the Code or provisions of
Similar Law pursuant to one or more
statutory or administrative exemptions. |
|
|
|
|
|
See Certain ERISA Considerations. |
|
|
|
Transfer Restrictions for Class
B Certificates
|
|
The Class B Certificates may be sold
only to qualified institutional buyers,
as defined in Rule 144A under the
Securities Act of 1933, as amended (the
Securities Act), for so long as they
are outstanding. See Description of
the Certificates Transfer
Restrictions for Class B Certificates. |
|
|
|
Governing Law
|
|
The Class B Certificates and the Series
B Equipment Notes will be governed by
the laws of the State of New York. |
S-15
Summary Historical Consolidated Financial and Operating Data
The following tables present our summary historical consolidated financial and operating data.
We derived the statement of operations data for the six months ended June 30, 2011 and 2010 and the
balance sheet data as of June 30, 2011 from our unaudited condensed consolidated financial
statements for the quarter ended June 30, 2011 and the related notes thereto incorporated by
reference herein. We derived the balance sheet data as of June 30, 2010 from our unaudited
condensed consolidated financial statements for the quarter ended June 30, 2010 and the related
notes thereto, which are not incorporated by reference. The unaudited statement of operations data
for the interim periods may not be indicative of results for the year as a whole. We derived the
statement of operations for the years ended December 31, 2010 and 2009 and the balance sheet data
as of December 31, 2010 and 2009 from our audited consolidated financial statements for the year
ended December 31, 2010 and the related notes thereto incorporated by reference herein.
You should read the following tables in conjunction with (1) Managements Discussion and
Analysis of Financial Condition and Results of Operations and the condensed consolidated financial
statements and the related notes thereto incorporated by reference herein from our Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 2011 and (2) Managements Discussion and
Analysis of Financial Condition and Results of Operations and the consolidated financial
statements and the related notes thereto incorporated by reference herein from our Annual Report on
Form 10-K for the year ended December 31, 2010. See Where You Can Find More Information in this
prospectus supplement.
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
Year Ended |
|
|
June 30, |
|
December 31, |
(in millions) |
|
2011 |
|
2010 |
|
2010(1) |
|
2009(2) |
Operating revenue |
|
$ |
16,900 |
|
|
$ |
15,016 |
|
|
$ |
31,755 |
|
|
$ |
28,063 |
|
Operating expense |
|
|
16,511 |
|
|
|
14,096 |
|
|
|
29,538 |
|
|
|
28,387 |
|
Operating income (loss) |
|
|
389 |
|
|
|
920 |
|
|
|
2,217 |
|
|
|
(324 |
) |
Interest expense, net |
|
|
547 |
|
|
|
618 |
|
|
|
1,185 |
|
|
|
1,251 |
|
Net (loss) income |
|
|
(120 |
) |
|
|
211 |
|
|
|
593 |
|
|
|
(1,237 |
) |
|
|
|
(1) |
|
Includes (a) $450 million in restructuring and merger-related charges primarily associated
with (i) Northwest and the integration of Northwest operations into Delta and (ii) asset
impairment charges related to the initiative to substantially reduce our 50-seat aircraft
fleet and retired dedicated freighter aircraft and (b) $401 million primarily due to a loss on
extinguishment of debt. |
|
(2) |
|
Includes (a) $407 million in restructuring and merger-related charges associated with (i)
Northwest and the integration of Northwest operations into Delta and (ii) severance and
related costs, (b) an $83 million non-cash loss for the write-off of the unamortized discount
on the extinguishment of certain Northwest debt and (c) a non-cash income tax benefit of $321
million from our consideration of all income sources, including other comprehensive income. |
S-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2011 |
|
2010 |
|
2010 |
|
2009 |
Balance Sheet Data (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and short-term investments |
|
$ |
3,822 |
|
|
$ |
4,434 |
|
|
$ |
3,610 |
|
|
$ |
4,678 |
|
Restricted cash, cash equivalents and short-term investments |
|
|
476 |
|
|
|
447 |
|
|
|
447 |
|
|
|
444 |
|
Total assets |
|
|
43,878 |
|
|
|
43,809 |
|
|
|
43,188 |
|
|
|
43,789 |
|
Long-term debt and capital leases (including current maturities) |
|
|
14,661 |
|
|
|
15,783 |
|
|
|
15,252 |
|
|
|
17,198 |
|
Total stockholders equity |
|
|
785 |
|
|
|
199 |
|
|
|
897 |
|
|
|
245 |
|
|
|
|
|
Six Months Ended |
|
Year Ended |
|
|
June 30, |
|
December 31, |
|
|
2011 |
|
2010 |
|
2010 |
|
2009 |
Other Financial and Statistical Data(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue passenger miles (millions) |
|
|
93,295 |
|
|
|
92,261 |
|
|
|
193,169 |
|
|
|
188,943 |
|
Available seat miles (millions) |
|
|
116,360 |
|
|
|
111,999 |
|
|
|
232,684 |
|
|
|
230,331 |
|
Passenger mile yield |
|
|
15.51¢ |
|
|
|
13.89¢ |
|
|
|
14.11¢ |
|
|
|
12.60¢ |
|
Passenger revenue per available seat mile |
|
|
12.43¢ |
|
|
|
11.44¢ |
|
|
|
11.71¢ |
|
|
|
10.34¢ |
|
Operating cost per available seat mile |
|
|
14.19¢ |
|
|
|
12.59¢ |
|
|
|
12.69¢ |
|
|
|
12.32¢ |
|
Passenger load factor |
|
|
80.2% |
|
|
|
82.4% |
|
|
|
83.0% |
|
|
|
82.0% |
|
Fuel gallons consumed (millions) |
|
|
1,911 |
|
|
|
1,836 |
|
|
|
3,823 |
|
|
|
3,853 |
|
Average price per fuel gallon, net of hedging activity |
|
$ |
3.05 |
|
|
$ |
2.28 |
|
|
$ |
2.33 |
|
|
$ |
2.15 |
|
|
|
|
(1) |
|
Includes the operations of our contract carriers under capacity purchase agreements,
including non-owned carriers. |
S-17
RISK FACTORS
In considering whether to purchase the Class B Certificates, you should carefully consider all
of the information contained in or incorporated by reference in this prospectus supplement, the
accompanying prospectus and any related company free writing prospectus and other information which
may be incorporated by reference in this prospectus supplement and the accompanying prospectus
after the date hereof. In addition, you should carefully consider the risk factors described below,
along with any risk factors that may be included in our future reports filed with the SEC.
Risk Factors Relating to Delta
Our business and results of operations are dependent on the price and availability of aircraft
fuel. High fuel costs or cost increases could have a materially adverse effect on our operating
results. Likewise, significant disruptions in the supply of aircraft fuel would materially
adversely affect our operations and operating results.
Our operating results are significantly impacted by changes in the price and availability of
aircraft fuel. Fuel prices have increased substantially since the middle part of the last decade
and have returned to record high levels in 2011 after fluctuating significantly during the last
several years. Our average fuel price per gallon was $3.05 for the first six months of 2011. In
2010, our average fuel price per gallon was $2.33, an 8% increase from an average fuel price of
$2.15 in 2009. In 2008, our average fuel price per gallon was $3.16, a 41% increase from an average
price of $2.24 in 2007, which in turn was significantly higher than fuel prices just a few years
earlier. Fuel costs represented 30%, 29%, and 38% of our operating expense in 2010, 2009 and 2008,
respectively. Total operating expense for 2008 reflects a $7.3 billion non-cash charge from an
impairment of goodwill and other intangible assets and $1.1 billion in primarily non-cash
merger-related charges. Including these charges, fuel costs accounted for 28% of total operating
expense in 2008. Volatility in fuel costs has had a significant negative effect on our results of
operations and financial condition.
Our ability to pass along the increased costs of fuel to our customers may be affected by the
competitive nature of the airline industry. We often have not been able to increase our fares to
offset fully the effect of increased fuel costs in the past and we may not be able to do so in the
future.
In addition, our aircraft fuel purchase contracts do not provide material protection against
price increases or assure the availability of our fuel supplies. We purchase most of our aircraft
fuel under contracts that establish the price based on various market indices. We also purchase
aircraft fuel on the spot market, from offshore sources and under contracts that permit the
refiners to set the price. In an effort to manage our exposure to changes in fuel prices, we use
derivative instruments, which generally consist of three-way collar, swap, collar and call option
contracts with heating oil, Brent crude oil, West Texas Intermediate crude oil and jet fuel as the
underlying commodities. Even with our use of derivative instruments, we may not be able to
successfully manage this exposure. Depending on the type of hedging instrument used, our protection
from increases and ability to benefit from declines in fuel prices may be limited.
We are currently able to obtain adequate supplies of aircraft fuel, but it is impossible to
predict the future availability or price of aircraft fuel. Weather-related events, natural
disasters, political disruptions or wars involving oil-producing countries, changes in governmental
policy concerning aircraft fuel production, transportation or marketing, changes in aircraft fuel
production capacity, environmental concerns and other unpredictable events may result in additional
fuel supply shortages and fuel price increases in the future. Additional increases in fuel costs or
disruptions in fuel supplies could have additional negative effects on us.
S-18
Our funding obligations with respect to defined benefit pension plans we sponsor is significant and
can vary materially because of changes in investment asset returns and values.
The recent financial crisis and economic downturn resulted in broadly lower investment asset
returns and values, including in the defined benefit pension plans that we sponsor for eligible
employees and retirees. As of December 31, 2010, the defined benefit pension plans had an estimated
benefit obligation of approximately $17.5 billion and were funded through assets with a value of
approximately $8.2 billion. The benefit obligation is significantly affected by investment asset
returns and changes in interest rates, neither of which is in the control of Delta. We estimate
that our funding requirement for our defined benefit pension plans, which are governed by ERISA and
have been frozen for future accruals, is approximately $600 million in 2011. The significant level
of required funding is due primarily to the decline in the investment markets in 2008, which
negatively affected the value of our pension assets. Estimates of pension plan funding requirements
can vary materially from actual funding requirements because the estimates are based on various
assumptions concerning factors outside our control, including, among other things, the market
performance of assets; statutory requirements; and demographic data for participants, including the
number of participants and the rate of participant attrition. Results that vary significantly from
our assumptions could have a material impact on our future funding obligations.
Our obligation to post collateral in connection with our hedge contracts may have a substantial
impact on our short-term liquidity.
Under hedge contracts that we may enter into from time to time, counterparties to those
contracts can require us to fund the margin associated with any loss position on the contracts. If
fuel prices fall significantly below the levels at the time we enter into fuel hedging contracts,
we may be required to post a significant amount of collateral, which could have an impact on the
level of our unrestricted cash and cash equivalents and short-term investments.
Our substantial indebtedness may limit our financial and operating activities and may adversely
affect our ability to incur additional debt to fund future needs.
We have substantial indebtedness, which could:
|
|
|
require us to dedicate a substantial portion of cash flow from operations to
the payment of principal and interest on indebtedness, thereby reducing the funds available
for operations and future business opportunities; |
|
|
|
|
make it more difficult for us to satisfy our payment and other obligations
under our indebtedness; |
|
|
|
|
limit our ability to borrow additional money for working capital,
restructurings, capital expenditures, research and development, investments, acquisitions
or other purposes, if needed, and increasing the cost of any of these borrowings; |
|
|
|
|
make us more vulnerable to economic downturns, adverse industry conditions or
catastrophic external events; |
|
|
|
|
limit our ability to withstand competitive pressures; |
|
|
|
|
reduce our flexibility in planning for or responding to changing business and
economic conditions; and/or |
|
|
|
|
limit our flexibility in responding to changing business and economic
conditions, including increased competition and demand for new services, placing us at a
disadvantage when compared to our competitors that have less debt, and making us more
vulnerable than our competitors who have less debt to a downturn in our business, industry
or the economy in general. |
S-19
In addition, a substantial level of indebtedness, particularly because substantially all of
our assets are currently subject to liens, could limit our ability to obtain additional financing
on acceptable terms or at all for working capital, capital expenditures and general corporate
purposes. We have historically had substantial liquidity needs in the operation of our business.
These liquidity needs could vary significantly and may be affected by general economic conditions,
industry trends, performance and many other factors not within our control.
Agreements governing our debt, including credit agreements and indentures, include financial and
other covenants that impose restrictions on our financial and business operations.
Our credit facilities and indentures for secured notes have various financial and other
covenants that require us to maintain, depending on the particular agreement, minimum fixed charge
coverage ratios, minimum unrestricted cash reserves and/or minimum collateral coverage ratios. The
value of the collateral that has been pledged in each facility may change over time, including due
to factors that are not under our control, resulting in a situation where we may not be able to
maintain the collateral coverage ratio. In addition, the credit facilities and indentures contain
other negative covenants customary for such financings. If we fail to comply with these covenants
and are unable to obtain a waiver or amendment, an event of default would result. These covenants
are subject to important exceptions and qualifications.
The credit facilities and indentures also contain other events of default customary for such
financings. If an event of default were to occur, the lenders or the trustee could, among other
things, declare outstanding amounts due and payable, and our cash may become restricted. We cannot
provide assurance that we would have sufficient liquidity to repay or refinance the borrowings or
notes under any of the credit facilities if such amounts were accelerated upon an event of default.
In addition, an event of default or declaration of acceleration under any of the credit facilities
or the indentures could also result in an event of default under other of our financing agreements.
Employee strikes and other labor-related disruptions may adversely affect our operations.
Our business is labor intensive, utilizing large numbers of pilots, flight attendants and
other personnel. As of December 31, 2010, approximately 17% of our workforce was unionized. Strikes
or labor disputes with our unionized employees may adversely affect our ability to conduct
business. Relations between air carriers and labor unions in the United States are governed by the
Railway Labor Act, which provides that a collective bargaining agreement between an airline and a
labor union does not expire, but instead becomes amendable as of a stated date. The Railway Labor
Act generally prohibits strikes or other types of self-help actions both before and after a
collective bargaining agreement becomes amendable, unless and until the collective bargaining
processes required by the Railway Labor Act have been exhausted.
In addition, if we or our affiliates are unable to reach agreement with any of our unionized
work groups on future negotiations regarding the terms of their collective bargaining agreements or
if additional segments of our workforce become unionized, we may be subject to work interruptions
or stoppages, subject to the requirements of the Railway Labor Act. Likewise, if third party
regional carriers with whom we have contract carrier agreements are unable to reach agreement with
their unionized work groups on current or future negotiations regarding the terms of their
collective bargaining agreements, those carriers may be subject to work interruptions or stoppages,
subject to the requirements of the Railway Labor Act, which could have a negative impact on our
operations.
Completion of the integration of the Delta and Northwest Airlines workforces may present
challenges.
The successful integration of the pre-merger Northwest Airlines operations into Delta and
achievement of the anticipated benefits of the combination depend on integrating the pre-merger
Delta and Northwest Airlines employee groups and on maintaining productive employee relations.
While integration of a number of the workgroups (including pilots, aircraft maintenance
technicians, dispatchers, meteorologists, simulator technicians and office and clerical staff) has
been completed, completion of the integration of certain workgroups (including flight attendants,
airport employees and reservations employees) of the two pre-merger airlines will require the final
resolution of union representation issues. We cannot predict when
S-20
or how these remaining representation issues will be resolved. Unexpected delay, expense or
other challenges to integrating the workforces could affect our financial performance.
Extended interruptions or disruptions in service at one of our hub airports could have a material
adverse impact on our operations.
Our business is heavily dependent on our operations at the Atlanta airport and at our other
hub airports in Amsterdam, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK,
Paris-Charles de Gaulle, Salt Lake City and Tokyo-Narita. Each of these hub operations includes
flights that gather and distribute traffic from markets in the geographic region surrounding the
hub to other major cities and to other Delta hubs. A significant interruption or disruption in
service at one of our hubs could have a serious impact on our business, financial condition and
results of operations.
We are increasingly dependent on technology in our operations, and if our technology fails or we
are unable to continue to invest in new technology, our business may be adversely affected.
We have become increasingly dependent on technology initiatives to reduce costs and to enhance
customer service in order to compete in the current business environment. For example, we have made
significant investments in delta.com, check-in kiosks and related initiatives. The performance and
reliability of the technology are critical to our ability to attract and retain customers and our
ability to compete effectively. Because of the rapid pace of new developments, these initiatives
will continue to require significant capital investments in our technology infrastructure. If we
are unable to make these investments, our business and operations could be negatively affected. If
we are unable to manage these challenges effectively, our business and results of operations could
be negatively affected.
In addition, any internal technology error or failure impacting systems hosted internally at
our data centers or externally at third party locations or large scale external interruption in
technology infrastructure we depend on, such as power, telecommunications or the internet, may
disrupt our technology network. Any individual, sustained or repeated failure of technology could
impact our customer service and result in increased costs. Our technology systems and related data
may be vulnerable to a variety of sources of interruption due to events beyond our control,
including natural disasters, terrorist attacks, telecommunications failures, computer viruses,
hackers and other security issues. While we have in place, and continue to invest in, technology
security initiatives and disaster recovery plans, these measures may not be adequate or implemented
properly to prevent a business disruption and its adverse financial consequences to our business.
If we experience losses of senior management personnel and other key employees, our operating
results could be adversely affected.
We are dependent on the experience and industry knowledge of our officers and other key
employees to execute our business plans. If we experience a substantial turnover in our leadership
and other key employees, our performance could be materially adversely impacted. Furthermore, we
may be unable to attract and retain additional qualified executives as needed in the future.
Our credit card processors have the ability to take significant holdbacks in certain circumstances.
The initiation of such holdbacks likely would have a material adverse effect on our liquidity.
Most of the tickets we sell are paid for by customers who use credit cards. Our credit card
processing agreements provide that no holdback of receivables or reserve is required except in
certain circumstances, including if we do not maintain a required level of unrestricted cash. If
circumstances were to occur that would allow American Express or our VISA/MasterCard processor to
initiate a holdback, the negative impact on our liquidity likely would be material.
S-21
We are at risk of losses and adverse publicity stemming from any accident involving our aircraft.
An aircraft crash or other accident could expose us to significant tort liability. The
insurance we carry to cover damages arising from any future accidents may be inadequate. In the
event that the insurance is not adequate, we may be forced to bear substantial losses from an
accident. In addition, any accident involving an aircraft that we operate or an aircraft that is
operated by an airline that is one of our codeshare partners could create a public perception that
our aircraft are not safe or reliable, which could harm our reputation, result in air travelers
being reluctant to fly on our aircraft and harm our business.
Our business is subject to the effects of weather and natural disasters and seasonality, which can
cause our results to fluctuate.
Our results of operations will reflect fluctuations from weather, natural disasters and
seasonality. Severe weather conditions and natural disasters can significantly disrupt service and
create air traffic control problems. These events decrease revenue and can also increase costs. In
addition, increases in frequency, severity or duration of thunderstorms, hurricanes, typhoons or
other severe weather events, including from changes in the global climate, could result in
increases in fuel consumption to avoid such weather, turbulence-related injuries, delays and
cancellations, any of which would increase the potential for greater loss of revenue and higher
costs. In addition, demand for air travel is typically higher in the June and September quarters,
particularly in international markets, because there is more vacation travel during these periods
than during the remainder of the year. Because of fluctuations in our results from weather,
natural disasters and seasonality, operating results for a historical period are not necessarily
indicative of operating results for a future period and operating results for an interim period are
not necessarily indicative of operating results for an entire year.
An extended disruption in services provided by our third party regional carriers could have a
material adverse effect on our results of operations.
We utilize the services of third party providers in a number of areas in support of our
operations that are integral to our business, including third party carriers in the Delta
Connection program. While we have agreements with these providers that define expected service
performance, we do not have direct control over the operations of these carriers. To the extent
that a significant disruption in our regional operations occurs because any of these providers are
unable to perform their obligations over an extended period of time, our revenue may be reduced or
our expenses may be increased resulting in a material adverse effect on our results of operations.
Our ability to use net operating loss carryforwards to offset future taxable income for U.S.
federal income tax purposes is subject to limitation.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended, a corporation
that undergoes an ownership change is subject to limitations on its ability to utilize its
pre-change net operating losses (NOLs), to offset future taxable income. In general, an ownership
change occurs if the aggregate stock ownership of certain stockholders (generally 5% shareholders,
applying certain look-through rules) increases by more than 50 percentage points over such
stockholders lowest percentage ownership during the testing period (generally three years).
As of December 31, 2010, Delta reported a consolidated federal and state pre-tax NOL
carryforward of approximately $17.5 billion. Both Delta and Northwest experienced an ownership
change in 2007 as a result of their respective plans of reorganization under Chapter 11 of the U.S.
Bankruptcy Code. As a result of the merger, Northwest experienced a subsequent ownership change.
Delta also experienced a subsequent ownership change on December 17, 2008 as a result of the
merger, the issuance of equity to employees in connection with the merger and other transactions
involving the sale of our common stock within the testing period.
The Delta and Northwest ownership changes resulting from the merger could limit the ability to
utilize pre-change NOLs that were not subject to limitation, and could further limit the ability to
utilize NOLs that
S-22
were already subject to limitation. Limitations imposed on the ability to use NOLs to offset
future taxable income could cause U.S. federal income taxes to be paid earlier than otherwise would
be paid if such limitations were not in effect and could cause such NOLs to expire unused, in each
case reducing or eliminating the benefit of such NOLs. Similar rules and limitations may apply for
state income tax purposes. NOLs generated subsequent to December 17, 2008 are not limited.
Risk Factors Relating to the Airline Industry
The airline industry is highly competitive and, if we cannot successfully compete in the
marketplace, our business, financial condition and operating results will be materially adversely
affected.
We face significant competition with respect to routes, services and fares. Our domestic
routes are subject to competition from both new and established carriers, some of which have lower
costs than we do and provide service at low fares to destinations served by us. In particular, we
face significant competition at our domestic hub airports in Atlanta, Cincinnati, Detroit, Memphis,
Minneapolis-St. Paul, New York-JFK and Salt Lake City either directly at those airports or at the
hubs of other airlines that are located in close proximity to our hubs. We also face competition in
smaller to medium-sized markets from regional jet operators.
Discount carriers, including Southwest, AirTran (prior to its acquisition by Southwest) and
JetBlue, have placed significant competitive pressure on us in the United States and on other
network carriers in the domestic market. In addition, other network carriers have also
significantly reduced their costs over the last several years. Our ability to compete effectively
depends, in part, on our ability to maintain a competitive cost structure. If we cannot maintain
our costs at a competitive level, then our business, financial condition and operating results
could be materially adversely affected.
Our international routes are subject to competition from both domestic and foreign carriers.
Through alliance and other marketing and codesharing agreements with foreign carriers, U.S.
carriers have increased their ability to sell international transportation, such as services to and
beyond traditional European and Asian gateway cities. Similarly, foreign carriers have obtained
increased access to interior U.S. passenger traffic beyond traditional U.S. gateway cities through
these relationships. In particular, alliances formed by domestic and foreign carriers, including
the Star Alliance (among United Air Lines, Continental Airlines, Lufthansa German Airlines, Air
Canada and others) and the oneworld alliance (among American Airlines, British Airways, Qantas and
others) have significantly increased competition in international markets. The adoption of
liberalized Open Skies Aviation Agreements with an increasing number of countries around the world,
including in particular the Open Skies Treaties with the Member States of the European Union and
Japan, could significantly increase competition among carriers serving those markets.
Several joint ventures among U.S. and foreign carriers, including our transatlantic joint
venture with Air France-KLM and Alitalia, have received grants of antitrust immunity allowing the
participating carriers to coordinate schedules, pricing, sales and inventory. Other joint ventures
that have received anti-trust immunity include a transatlantic alliance among United, Continental,
Air Canada and Lufthansa, a transpacific joint venture among United, Continental and All Nippon
Airways, a transatlantic joint venture among American, British Airways and Iberia, and a
transpacific joint venture between American and Japan Air Lines.
Consolidation in the domestic airline industry and changes in international alliances have
altered and will continue to alter the competitive landscape in the industry by resulting in the
formation of airlines and alliances with increased financial resources, more extensive global
networks and altered cost structures.
The rapid spread of contagious illnesses can have a material adverse effect on our business and
results of operations.
The rapid spread of a contagious illness can have a material adverse effect on the demand for
worldwide air travel and therefore have a material adverse effect on our business and results of
operations. Moreover, our operations could be negatively affected if employees are quarantined as
the result of
S-23
exposure to a contagious illness. Similarly, travel restrictions or operational problems
resulting from the rapid spread of contagious illnesses in any part of the world in which we
operate may have a materially adverse impact on our business and results of operations.
Terrorist attacks or international hostilities may adversely affect our business, financial
condition and operating results.
The terrorist attacks of September 11, 2001 caused fundamental and permanent changes in the
airline industry, including substantial revenue declines and cost increases, which resulted in
industry-wide liquidity issues. Potential terrorist attacks or security breaches or fear of such
events, even if not made directly on the airline industry, could negatively affect us and the
airline industry. The potential negative effects include increased security (including as a result
of our global operations), insurance and other costs and lost revenue from increased ticket refunds
and decreased ticket sales. Our financial resources might not be sufficient to absorb the adverse
effects of any further terrorist attacks or other international hostilities involving the United
States.
The airline industry is subject to extensive government regulation, and new regulations may
increase our operating costs.
Airlines are subject to extensive regulatory and legal compliance requirements that result in
significant costs. For instance, the Federal Aviation Administration (FAA) from time to time
issues directives and other regulations relating to the maintenance and operation of aircraft that
necessitate significant expenditures. We expect to continue incurring expenses to comply with the
FAAs regulations.
Other laws, regulations, taxes and airport rates and charges have also been imposed from time
to time that significantly increase the cost of airline operations or reduce revenues. The industry
is heavily taxed. For example, the Aviation and Transportation Security Act mandates the
federalization of certain airport security procedures and imposes security requirements on airports
and airlines, most of which are funded by a per ticket tax on passengers and a tax on airlines. The
federal government has on several occasions proposed a significant increase in the per ticket tax.
A ticket tax increase, if implemented, could negatively impact our results of operations.
Proposals to address congestion issues at certain airports or in certain airspace,
particularly in the Northeast United States, have included concepts such as congestion-based
landing fees, slot auctions or other alternatives that could impose a significant cost on the
airlines operating in those airports or airspace and impact the ability of those airlines to
respond to competitive actions by other airlines. Furthermore, events related to extreme weather
delays have caused Congress and the U.S. Department of Transportation (DOT) to consider proposals
related to airlines handling of lengthy flight delays. The recent enactment of such a regulation
by the DOT could have a negative impact on our operations in certain circumstances.
Future regulatory action concerning climate change and aircraft emissions could have a
significant effect on the airline industry. For example, the European Commission has adopted an
emissions trading scheme applicable to all flights operating in the European Union, including
flights to and from the United States. We expect that such a system will impose significant costs
on our operations in the European Union. Other laws or regulations such as this emissions trading
scheme or other U.S. or foreign governmental actions may adversely affect our operations and
financial results, either through direct costs in our operations or through increases in costs for
jet fuel that could result from jet fuel suppliers passing on increased costs that they incur under
such a system.
We and other U.S. carriers are subject to domestic and foreign laws regarding privacy of
passenger and employee data that are not consistent in all countries in which we operate. In
addition to the heightened level of concern regarding privacy of passenger data in the United
States, certain European government agencies are initiating inquiries into airline privacy
practices. Compliance with these regulatory regimes is expected to result in additional operating
costs and could impact our operations and any future expansion.
S-24
Our insurance costs have increased substantially as a result of the September 11, 2001 terrorist
attacks, and further increases in insurance costs or reductions in coverage could have a material
adverse impact on our business and operating results.
As a result of the terrorist attacks on September 11, 2001, aviation insurers significantly
(1) reduced the maximum amount of insurance coverage available to commercial air carriers for
liability to persons (other than employees or passengers) for claims resulting from acts of
terrorism, war or similar events and (2) increased the premiums for such coverage and for aviation
insurance in general. Since September 24, 2001, the U.S. government has been providing U.S.
airlines with war-risk insurance to cover losses, including those resulting from terrorism, to
passengers, third parties (ground damage) and the aircraft hull. The coverage currently extends
through September 30, 2011, and we expect the coverage to be further extended. The withdrawal of
government support of airline war-risk insurance would require us to obtain war-risk insurance
coverage commercially, if available. Such commercial insurance could have substantially less
desirable coverage than that currently provided by the U.S. government, may not be adequate to
protect our risk of loss from future acts of terrorism, may result in a material increase to our
operating expenses or may not be obtainable at all, resulting in an interruption to our operations.
Risk Factors Relating to the Class B Certificates and the Offering
Appraisals should not be relied upon as a measure of realizable value of the Aircraft.
Three independent appraisal and consulting firms have prepared appraisals of the Aircraft. The
appraisal letters provided by these firms are annexed to this prospectus supplement as Appendix II.
The AISI appraisal is dated March 10, 2011; the BK appraisal is dated March 16, 2011; and the MBA
appraisal is dated March 15, 2011. The appraised values provided by each of AISI, BK and MBA are
presented as of or around the respective dates of their appraisals. The appraisals do not purport
to, and do not, reflect the current market value of the Aircraft. Such appraisals of the Aircraft
are subject to a number of significant assumptions and methodologies (which differ among the
appraisers) and were prepared without a physical inspection of the Aircraft. The appraisals take
into account base value, which is the theoretical value for an aircraft assuming a balanced
market, while current market value is the value for an aircraft in the actual market. In
particular, the appraisals of the Aircraft indicate appraised base value, adjusted for the
maintenance status of the Aircraft around the time of the appraisals (but assuming the related
engines are in a half-time condition). Appraisals that are more current or are based on other
assumptions and methodologies (or a physical inspection of the Aircraft) may result in valuations
that are materially different from those contained in such appraisals of the Aircraft. See
Description of the Aircraft and the Appraisals The Appraisals.
An appraisal is only an estimate of value. It does not necessarily indicate the price at which
an aircraft may be purchased or sold in the market. In particular, the appraisals of the Aircraft
are estimates of the values of the Aircraft assuming the Aircraft are in a certain condition, which
may not be the case. An appraisal should not be relied upon as a measure of realizable value. The
proceeds realized upon the exercise of remedies with respect to any Aircraft, including a sale of
such Aircraft, may be less than its appraised value. The value of an Aircraft if remedies are
exercised under the applicable Indenture will depend on various factors, including market, economic
and airline industry conditions; the supply of similar aircraft; the availability of buyers; the
condition of the Aircraft; the time period in which the Aircraft is sought to be sold; and whether
the Aircraft is sold separately or as part of a block.
As discussed under Risk Factors Relating to the Airline Industry Terrorist attacks or
international hostilities may adversely affect our business, financial condition and operating
results, since September 11, 2001, the airline industry has suffered substantial losses. In
response to adverse market conditions, many U.S. air carriers and lessors have reduced the number
of aircraft in operation, and there may be further reductions, particularly by air carriers in
bankruptcy or liquidation. Any such reduction of aircraft of the same models as the Aircraft could
adversely affect the value of the Aircraft.
S-25
Accordingly, we cannot assure you that the proceeds realized upon any exercise of remedies
with respect to the Aircraft would be sufficient to satisfy in full payments due on the Equipment
Notes relating to the Aircraft or the full amount of distributions expected on the Certificates.
If we fail to perform maintenance responsibilities, the value of the Aircraft may deteriorate.
To the extent described in the Indentures, we will be responsible for the maintenance,
service, repair and overhaul of the Aircraft. If we fail to perform these responsibilities
adequately, the value of the Aircraft may be reduced. In addition, the value of the Aircraft may
deteriorate even if we fulfill our maintenance responsibilities. As a result, it is possible that
upon a liquidation, there will be less proceeds than anticipated to repay the holders of Equipment
Notes. See Description of the Equipment Notes Certain Provisions of the Indentures
Maintenance and Operation.
Inadequate levels of insurance may result in insufficient proceeds to repay holders of related
Equipment Notes.
To the extent described in the Indentures, we must maintain all-risk aircraft hull insurance
on the Aircraft. If we fail to maintain adequate levels of insurance, the proceeds which could be
obtained upon an Event of Loss of an Aircraft may be insufficient to repay the holders of the
related Equipment Notes. See Description of the Equipment Notes Certain Provisions of the
Indentures Insurance.
Repossession of Aircraft may be difficult, time-consuming and expensive.
There will be no general geographic restrictions on our ability to operate the Aircraft.
Although we do not currently intend to do so, we are permitted to register the Aircraft in certain
foreign jurisdictions and to lease the Aircraft, and to enter into interchange or pooling
arrangements with respect to the Aircraft, with unrelated third parties. It may be difficult,
time-consuming and expensive for the Loan Trustee under an Indenture to exercise its repossession
rights, particularly if the related Aircraft is located outside the United States, is registered in
a foreign jurisdiction or is leased to or in the possession of a foreign or domestic operator.
Additional difficulties may exist if such a lessee or other operator is the subject of a
bankruptcy, insolvency or similar event. See Description of the Equipment Notes Certain
Provisions of the Indentures Registration, Leasing and Possession.
In addition, some jurisdictions may allow for other liens or other third party rights to have
priority over a Loan Trustees security interest in an Aircraft. As a result, the benefits of a
Loan Trustees security interest in an Aircraft may be less than they would be if the Aircraft were
located or registered in the United States.
Upon repossession of an Aircraft, the Aircraft may need to be stored and insured. The costs of
storage and insurance can be significant and the incurrence of such costs could reduce the proceeds
available to repay the Certificateholders. In addition, at the time of foreclosing on the lien on
an Aircraft under the related Indenture, the Airframe subject to such Indenture might not be
equipped with the Engines subject to the same Indenture. If Delta fails to transfer title to
engines not owned by Delta that are attached to a repossessed Airframe, it could be difficult,
expensive and time-consuming to assemble an Aircraft consisting of an Airframe and Engines subject
to the same Indenture.
The Liquidity Providers, the Subordination Agent and the Trustees will receive certain payments
before the Certificateholders do. In addition, the Class B Certificates rank generally junior to
the Class A Certificates.
Under the Intercreditor Agreement, each Liquidity Provider will receive payment of all amounts
owed to it, including reimbursement of drawings made to pay interest on the applicable class of
Certificates, before the holders of any class of Certificates receive any funds. In addition, the
Subordination Agent and the Trustees will receive certain payments before the holders of any class
of Certificates receive distributions. See Description of the Intercreditor Agreement Priority
of Distributions.
S-26
In addition, the Class B Certificates rank generally junior to the Class A Certificates.
Moreover, as a result of the subordination provisions in the Intercreditor Agreement, in a case
involving the liquidation of substantially all of the assets of Delta, the Class B
Certificateholders may receive a smaller distribution in respect of their claims than holders of
unsecured claims against Delta of the same amount.
Payments of principal on the Certificates are subordinated to payments of interest on the
Certificates, subject to certain limitations and certain other payments. Consequently, a payment
default under any Equipment Note or a Triggering Event may cause the distribution of interest on
the Certificates or such other amounts from payments received with respect to principal on one or
more series of Equipment Notes. If this occurs, the interest accruing on the remaining Equipment
Notes may be less than the amount of interest expected to be distributed from time to time on the
remaining Certificates. This is because the interest on the Certificates may be based on a Pool
Balance that exceeds the outstanding principal balance of the remaining Equipment Notes. As a
result of this possible interest shortfall, the holders of the Certificates may not receive the
full amount expected after a payment default under any Equipment Note even if all Equipment Notes
are eventually paid in full. For a more detailed discussion of the subordination provisions of the
Intercreditor Agreement, see Description of the Intercreditor Agreement Priority of
Distributions.
In addition, if Delta is in bankruptcy or other specified defaults have occurred, the
subordination provisions applicable to the Certificates permit certain distributions to be made on
Class B Certificates prior to making distributions in full on the Class A Certificates.
Certain Certificateholders may not participate in controlling the exercise of remedies in a default
scenario.
If an Indenture Event of Default is continuing under an Indenture, subject to certain
conditions, the Loan Trustee under such Indenture will be directed by the Controlling Party in
exercising remedies under such Indenture, including accelerating the applicable Equipment Notes or
foreclosing the lien on the Aircraft with respect to which such Equipment Notes were issued. See
Description of the Certificates Indenture Events of Default and Certain Rights Upon an
Indenture Event of Default.
The Controlling Party will be:
|
|
|
if Final Distributions have not been paid in full to holders of the Class A
Certificates, the Class A Trustee; |
|
|
|
|
if Final Distributions have been paid in full to the holders of Class A Certificates,
but not to the holders of the Class B Certificates, the Class B Trustee; and |
|
|
|
|
under certain circumstances, and notwithstanding the foregoing, the Liquidity Provider
with the largest amount owed to it. |
As a result of the foregoing, if the Class B Trustee is not the Controlling Party with respect
to an Indenture, the Class B Certificateholders will have no rights to participate in directing the
exercise of remedies under such Indenture. The Class B Trustee cannot be the Controlling Party with
respect to an Indenture if the Final Distributions with respect to the Class A Certificates have
not been paid in full to the holders of the Class A Certificates.
The proceeds from the disposition of any Aircraft or Equipment Notes may not be sufficient to pay
all amounts distributable to the Certificateholders.
During the continuation of any Indenture Event of Default under an Indenture, the Equipment
Notes issued under such Indenture or the related Aircraft may be sold in the exercise of remedies
with respect to that Indenture, subject to certain limitations. See Description of the
Intercreditor Agreement Intercreditor Rights Limitation on Exercise of Remedies. The market
for Aircraft or Equipment Notes
S-27
during the continuation of any Indenture Event of Default may be very limited, and there can
be no assurance as to whether they could be sold or the price at which they could be sold. If any
Equipment Notes are sold for less than their outstanding principal amount or any Aircraft are sold
for less than the outstanding principal amount of the related Equipment Notes, the Class B
Certificateholders and, depending on the amount of the shortfall, the Class A Certificateholders
will receive a smaller amount of principal distributions than anticipated and will not have any
claim for the shortfall against Delta (except in the case that Aircraft are sold for less than the
outstanding principal amount of the related Equipment Notes), any Liquidity Provider or any
Trustee. Any default arising under an Indenture solely by reason of the cross-default in such
Indenture may not be of a type required to be cured under Section 1110. Any cash collateral held as
a result of the cross-collateralization of the Equipment Notes also would not be entitled to the
benefits of Section 1110.
Any credit ratings assigned to the Class B Certificates are not a recommendation to buy and may be
lowered or withdrawn in the future.
Any credit rating assigned to the Class B Certificates is not a recommendation to purchase,
hold or sell the Class B Certificates, because such rating does not address market price or
suitability for a particular investor. A rating may change during any given period of time and may
be lowered or withdrawn entirely by a rating agency if in its judgment circumstances in the future
(including the downgrading of Delta, the Depositary or the Class B Liquidity Provider) so warrant.
Moreover, any change in a rating agencys assessment of the risks of aircraft-backed debt (and
similar securities such as the Class B Certificates) could adversely affect the credit rating
issued by such rating agency with respect to the Class B Certificates.
Any credit ratings assigned to the Class B Certificates would be expected to address the
likelihood of timely payment of interest (at the Stated Interest Rate and without any premium) when
due on the Class B Certificates and the ultimate payment of principal distributable under the Class
B Certificates by the Final Legal Distribution Date. Such credit ratings would not be expected to
address the possibility of certain defaults, optional redemptions or other circumstances (such as
an Event of Loss to an Aircraft), which could result in the payment of the outstanding principal
amount of the Class B Certificates prior to the final expected Regular Distribution Date.
The reduction, suspension or withdrawal of any credit ratings assigned to the Class B
Certificates would not, by itself, constitute an Indenture Event of Default.
As a Certificateholder, you will have no protection against our entry into highly leveraged or
extraordinary transactions, and there are no financial or other covenants in the Certificates, the
Equipment Notes or the underlying agreements that impose restrictions on our financial and business
operations or our ability to execute any such transaction.
The Certificates (including the Class B Certificates), the Equipment Notes and the underlying
agreements will not contain any financial or other covenants or event risk provisions protecting
the Certificateholders in the event of a highly leveraged or other extraordinary transaction
affecting Delta or its affiliates. We do from time to time analyze opportunities presented by
various types of transactions, and we may conduct our business in a manner that could cause the
market price or liquidity of the Certificates to decline, could have a material adverse effect on
our financial condition or the credit rating of the Certificates or otherwise could restrict or
impair our ability to pay amounts due under the Equipment Notes and/or the related agreements,
including by entering into a highly leveraged or other extraordinary transaction.
Escrowed funds may be withdrawn and distributed to holders of Certificates without purchase of
Equipment Notes.
Under certain circumstances, less than all of the Deposits (including the Class B Deposits)
held in escrow may have been used to purchase Equipment Notes to be issued with respect to the
Aircraft by the Delivery Period Termination Date. This could occur because of delays in the release
of liens under the
S-28
Existing Financings with respect to the Aircraft or because of other reasons. See Description
of the Certificates Obligation to Purchase Equipment Notes. If any funds remain as Deposits
with respect to any Trust as of the Delivery Period Termination Date, such remaining funds will be
withdrawn by the Escrow Agent and distributed by the Paying Agent, with accrued and unpaid interest
on such remaining funds, but without any premium, to the Certificateholders of such Trust on a date
no earlier than 15 days after the Paying Agent has received notice of the event requiring such
distribution or, under certain circumstances, such remaining funds will be automatically returned
by the Depositary to the Paying Agent on the Outside Termination Date, and the Paying Agent will
distribute such funds to such Certificateholders as promptly as practicable thereafter. In
addition, if a Triggering Event occurs prior to the Delivery Period Termination Date, any Deposits
held in escrow will also be withdrawn and distributed to the Certificateholders. See Description
of the Deposit Agreements Other Withdrawals and Return of Deposits. If any of certain events of
loss occurs with respect to an Aircraft before such Aircraft is financed pursuant to this offering,
any Deposits relating to such Aircraft held in escrow with respect to each Trust will be similarly
withdrawn and distributed to the Certificateholders of such Trust. See Description of the Deposit
Agreements Other Withdrawals and Return of Deposits.
The holders of the Certificates are exposed to the credit risk of the Depositary.
The holders of the Certificates (including the Class B Certificates) may suffer losses or
delays in repayment in the event that the Depositary fails to pay when due the Deposits or accrued
interest thereon for any reason, including by reason of the insolvency of the Depositary. Delta is
not required to indemnify against any failure on the part of the Depositary to repay the Deposits
or accrued interest thereon in full on a timely basis. Amounts deposited with the Depositary under
the Escrow Agreements are not property of Delta and are not entitled to the benefits of Section
1110.
Because there is no current market for the Class B Certificates and the Class B Certificates are
subject to transfer restrictions, you may have a limited ability to resell Class B Certificates.
Prior to this offering of the Class B Certificates, there has been no trading market for the
Class B Certificates. Neither Delta nor the Class B Trust intends to apply for listing of the Class
B Certificates on any securities exchange. The underwriter may assist in resales of the Class B
Certificates, but it is not required to do so, and any market-making activity may be discontinued
at any time without notice at the sole discretion of the underwriter. A secondary market for the
Class B Certificates therefore may not develop. If a secondary market does develop, it might not
continue or it might not be sufficiently liquid to allow you to resell any of your Class B
Certificates. If an active trading market does not develop, the market price and liquidity of the
Class B Certificates may be adversely affected.
In addition, the Class B Certificates will be subject to transfer restrictions. They may be
sold only to qualified institutional buyers (QIBs), as defined in Rule 144A under the Securities
Act, for so long as they are outstanding. This additional restriction may make it more difficult
for you to resell any of your Class B Certificates, even if a secondary market does develop. See
Description of the Certificates Transfer Restrictions for Class B Certificates.
The liquidity of, and trading market for, the Class B Certificates also may be adversely
affected by general declines in the markets or by declines in the market for similar securities.
Such declines may adversely affect such liquidity and trading markets independent of Deltas
financial performance and prospects.
The market for Class B Certificates could be negatively affected by legislative and regulatory
changes.
The Class B Certificates are sold to investors under an exemption to the Investment Company
Act of 1940, as amended (the Investment Company Act), that permits the Class B Trust to issue the
Class B Certificates without registering as an investment company; provided that the Class B
Certificates may be initially sold, and subsequently re-sold, only to QIBs for so long as they are
outstanding. Absent a future change in law, these limitations will remain in place for so long as
the Class B Certificates remain outstanding.
S-29
Recent events in the debt markets, including defaults on asset-backed securities that had an
investment grade credit rating at the time of sale, have prompted a number of broad based
legislative and regulatory reviews, including a review of the regulations that permit the sale of
certain asset-backed securities based upon the credit ratings of such securities. In particular,
the SEC is required under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd
Frank Act) to adopt rule changes generally to remove any reference to credit ratings in its
regulations. If, in connection with the requirements of the Dodd Frank Act discussed in the
preceding sentence, the SEC adopts rule changes that eliminate or significantly limit the exemption
from the Investment Company Act that the Class B Trust relies upon, or if other legislative or
regulatory changes are enacted that affect the ability of the Class B Trust to issue the Class B
Certificates to QIBs or affect the ability of such QIBs to continue to hold or purchase the Class B
Certificates, or to resell their Class B Certificates to other QIBs, the interests of the holders
of the Class B Certificates may be adversely affected. For example, the secondary market (if any)
for the Class B Certificates could be negatively affected and, as a result, the market price of the
Class B Certificates could decrease.
S-30
USE OF PROCEEDS
The proceeds from the sale of the Class B Certificates will initially be held in escrow and
deposited with the Depositary, pending the financing of each Aircraft under an Indenture. The Class
B Trust will withdraw funds from the escrow to acquire from Delta the Series B Equipment Notes to
be issued as each Aircraft is subjected to the related Indenture. The Series B Equipment Notes will
be full recourse obligations of Delta. Delta will use the proceeds from the issuance of the Series
B Equipment Notes to reimburse itself, in part, for the repayment at maturity of the Existing
Financings (as described below). Delta will use any such proceeds not used in connection with the
foregoing to pay fees and expenses relating to this offering and for general corporate purposes.
The Aircraft are currently subject to liens under separate indentures under an enhanced
equipment trust certificate transaction entered into by Delta in September 2001 (the 2001-1 EETC
or the Existing Financings).
The 2001-1 EETC currently consists of two separate tranches of certificates, each of which
bear interest at a fixed rate as follows: 7.111% per annum with respect to the class A-2
certificates and 7.711% per annum with respect to the class B certificates. Final distributions on
such class A-2 and class B certificates are scheduled to occur on September 18, 2011.
After the Aircraft are released from the liens of the Existing Financings, the Aircraft are
expected to be subjected to the liens of the Indentures securing the Series A Equipment Notes and
Series B Equipment Notes as provided in the Note Purchase Agreement. See Description of the
Aircraft and the AppraisalsDeliveries of Aircraft.
S-31
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings (loss) to fixed charges represents the number of times that fixed
charges are covered by earnings. Earnings (loss) represents income (loss) before income taxes, plus
fixed charges, less capitalized interest. Fixed charges include interest, whether expensed or
capitalized, amortization of debt costs, the portion of rent expense representative of the interest
factor and preferred stock dividends. For the six months ended June 30, 2011 and the years ended
December 31, 2009, 2008 and 2006, earnings were not sufficient to cover fixed charges by $199
million, $1.6 billion, $9.1 billion and $7.0 billion, respectively.
References to Successor refer to Delta on or after May 1, 2007, after giving effect to (1)
the cancellation of Delta common stock issued prior to the effective date of Deltas emergence from
bankruptcy on April 30, 2007; (2) the issuance of new Delta common stock and certain debt
securities in accordance with Deltas Joint Plan of Reorganization; and (3) the application of
fresh start reporting. References to Predecessor refer to Delta prior to May 1, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
Predecessor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eight |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Months |
|
|
Four |
|
|
|
|
Six Months |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended |
|
|
Months |
|
Year Ended |
|
|
Ended June |
|
Year Ended |
|
December |
|
|
Ended |
|
December |
|
|
30, |
|
December 31, |
|
31, |
|
|
April 30, |
|
31, |
|
|
2011 |
|
2010 |
|
2010 |
|
2009 |
|
2008 |
|
2007 |
|
|
2007 |
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings
(loss) to fixed
charges |
|
|
0.67 |
|
|
|
1.32 |
|
|
|
1.46 |
|
|
|
(0.13 |
) |
|
|
(10.26 |
) |
|
|
2.20 |
|
|
|
|
5.53 |
|
|
|
(6.19 |
) |
|
|
|
|
S-32
THE COMPANY
We provide scheduled air transportation for passengers and cargo throughout the United States
and around the world. Our global route network gives us a presence in every major domestic and
international market. Our route network is centered around the hub system we operate at airports in
Amsterdam, Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Paris-Charles
de Gaulle, Salt Lake City and Tokyo-Narita. Each of these hub operations includes flights that
gather and distribute traffic from markets in the geographic region surrounding the hub to domestic
and international cities and to other hubs. Our network is supported by a fleet of aircraft that is
varied in terms of size and capabilities, giving us flexibility to adjust aircraft to the network.
Other key characteristics of our route network include:
|
|
|
our alliances with foreign airlines, including our membership in SkyTeam, a global
airline alliance; |
|
|
|
|
our transatlantic joint venture with Air France-KLM and Alitalia; |
|
|
|
|
our domestic marketing alliance with Alaska Airlines, which expands our west coast
service; and |
|
|
|
|
agreements with multiple domestic regional carriers, which operate as Delta Connection,
including our wholly-owned subsidiary, Comair, Inc. |
We are a Delaware corporation headquartered in Atlanta, Georgia. Our principal executive
offices are located at Hartsfield-Jackson Atlanta International Airport, Atlanta, Georgia
30320-6001 and our telephone number is (404) 715-2600. Our website is www.delta.com. We have
provided this website address as an inactive textual reference only and the information contained
on our website is not a part of this prospectus supplement or the accompanying prospectus.
S-33
DESCRIPTION OF THE CERTIFICATES
The following summary of particular material terms of the Certificates supplements (and, to
the extent inconsistent therewith, replaces) the description of the general terms and provisions of
pass through certificates set forth in the prospectus accompanying this prospectus supplement. The
summary does not purport to be complete and is qualified in its entirety by reference to all of the
provisions of the Basic Agreement, which was filed with the SEC as an exhibit to Deltas
Registration Statement on Form S-4, File No. 333-106592, and to all of the provisions of the
Certificates, the Trust Supplements, the Liquidity Facilities, the Deposit Agreements, the Escrow
Agreements, the Note Purchase Agreement and the Intercreditor Agreement. Copies of the Class A
Certificates, the Class A Trust Supplement, the Class A Deposit Agreement and the Class A Escrow
Agreement were filed as exhibits to Deltas Current Report on Form 8-K, dated April 5, 2011. Copies
of the Class B Certificates, the Class B Trust Supplement, the Class B Deposit Agreement, the Class
B Escrow Agreement, the Note Purchase Agreement and the Intercreditor Agreement will be filed as
exhibits to a Current Report on Form 8-K to be filed by Delta with the SEC.
Except as otherwise indicated, the following summary relates to each of the Trusts and the
Certificates issued by each Trust. The terms and conditions governing each of the Trusts will be
substantially the same, except as described under Subordination and Transfer Restrictions
for Class B Certificates below and elsewhere in this prospectus supplement, and except that the
principal amount and scheduled principal repayments of the Equipment Notes held by each Trust and
the interest rate and maturity date of the Equipment Notes held by each Trust will differ.
General
Each pass through certificate (each, a Certificate and, collectively, the Certificates)
represents (in the case of the Class A Certificates), or will represent (in the case of the Class B
Certificates), a fractional undivided interest in one of two Delta Air Lines 2011-1 Pass Through
Trusts: the Class A Trust or the Class B Trust and, collectively, the Trusts. The Class A
Trust was formed pursuant to a pass through trust agreement between Delta and U.S. Bank Trust
National Association (as successor trustee to State Street Bank and Trust Company of Connecticut,
National Association), as trustee, dated as of November 16, 2000 (the Basic Agreement), and a
supplement thereto, dated as of April 5, 2011 (the Class A Trust Supplement and, together with
the Basic Agreement, the Class A Pass Through Trust Agreement). The Class B Trust will be formed
pursuant to the Basic Agreement and a supplement thereto, to be dated as of the Class B Issuance
Date (the Class B Trust Supplement and, together with the Basic Agreement, the Class B Pass
Through Trust Agreement and, the Class B Trust Supplement together with the Class A Trust
Supplement, collectively, the Trust Supplements and, the Class B Pass Through Trust Agreement
together with the Class A Pass Through Trust Agreement, collectively, the Pass Through Trust
Agreements). The trustee under the Class A Trust and the Class B Trust is referred to herein,
respectively, as the Class A Trustee and the Class B Trustee, and collectively as the
Trustees. The Certificates previously issued by the Class A Trust and the Certificates to be
issued by the Class B Trust are referred to herein, respectively, as the Class A Certificates and
the Class B Certificates. The Class A Trust will purchase all of the Series A Equipment Notes and
the Class B Trust will purchase all of the Series B Equipment Notes. The holders of the Class A
Certificates and the Class B Certificates are referred to herein, respectively, as the Class A
Certificateholders and the Class B Certificateholders, and collectively as the
Certificateholders. Assuming all of the Equipment Notes expected to be issued with respect to the
Aircraft are issued, the sum of the initial principal balance of the Equipment Notes held by each
Trust will equal the initial aggregate face amount of the Certificates issued by such Trust.
The Class B Certificates will be subject to transfer restrictions. They may be sold only to
QIBs for so long as they are outstanding. See Transfer Restrictions for Class B Certificates.
Each Class A Certificate represents, and each Class B Certificate will represent, a fractional
undivided interest in the Trust created by the applicable Pass Through Trust Agreement. The
property of each Trust (the Trust Property) consists, or will consist of, as the case may be:
S-34
|
|
|
subject to the Intercreditor Agreement, the Equipment Notes acquired by such Trust
prior to the Delivery Period Termination Date, all monies at any time paid thereon and all
monies due and to become due thereunder; |
|
|
|
|
the rights of such Trust to acquire the related series of Equipment Notes under the
Note Purchase Agreement; |
|
|
|
|
the rights of such Trust under the applicable Escrow Agreement to request the Escrow
Agent to withdraw from the Depositary funds sufficient to enable such Trust to purchase
the related series of Equipment Notes upon the financing of an Aircraft under the related
Indenture prior to the Delivery Period Termination Date; |
|
|
|
|
the rights of such Trust under the Intercreditor Agreement (including all rights to
receive monies receivable in respect of such rights); |
|
|
|
|
all monies receivable under the separate Liquidity Facility for such Trust; and |
|
|
|
|
funds from time to time deposited with the applicable Trustee in accounts relating to
such Trust. (Trust Supplements, Section 1.01) |
The Certificates represent fractional undivided interests in the respective Trusts only, and
all payments and distributions thereon will be made only from the Trust Property of the related
Trust. (Basic Agreement, Sections 2.01 and 3.09; Trust Supplements, Section 3.01) The Certificates
do not represent indebtedness of the Trusts, and references in this prospectus supplement to
interest accruing on the Certificates are included for purposes of computation only. (Trust
Supplements, Section 3.01) The Certificates do not represent an interest in or obligation of Delta,
the Trustees, the Subordination Agent, any of the Loan Trustees or any affiliate of any thereof.
Each Certificateholder by its acceptance of a Certificate agrees to look solely to the income and
proceeds from the Trust Property of the related Trust for payments and distributions on such
Certificate. (Basic Agreement, Section 3.09)
Pursuant to the Escrow Agreement applicable to each Trust, the Certificateholders of such
Trust, as holders of the Escrow Receipts affixed to each Certificate issued by such Trust, are
entitled to certain rights with respect to the Deposits relating to such Trust. Accordingly, any
transfer of a Certificate will have the effect of transferring the corresponding rights with
respect to the Deposits, and rights with respect to the Deposits may not be separately transferred
by the Certificateholders. In addition, the Certificates and the related Escrow Receipts may not be
separately assigned or transferred. (Escrow Agreements, Section 1.03) Rights with respect to the
Deposits and the Escrow Agreement relating to a Trust, except for the right to direct withdrawals
for the purchase of related Equipment Notes, will not constitute Trust Property. (Trust
Supplements, Section 1.01) Payments to the Certificateholders in respect of the Deposits and the
Escrow Receipts relating to a Trust will constitute payments to such Certificateholders solely in
their capacity as holders of the related Escrow Receipts.
The Class A Certificates were issued in fully registered form and are subject to the
provisions described below under Book-Entry Registration; Delivery and Form. The Class B
Certificates will be issued in fully registered form only and will be subject to such provisions
and the provisions described below under Transfer Restrictions for Class B Certificates. The
Class A Certificates were, and the Class B Certificates will be, issued only in minimum
denominations of $2,000 (or, in the case of the Class
B Certificates, such other denomination that is the lowest integral multiple of $1,000, that
is, at the time of issuance, equal to at least 1,000 euros) and integral multiples of $1,000 in
excess thereof, except that, in the case of the Class B Certificate, one Class B Certificate may
be, issued in a different denomination. (Trust Supplements, Section 4.01(a))
S-35
Payments and Distributions
The following description of distributions on the Certificates should be read in conjunction
with the description of the Intercreditor Agreement because the Intercreditor Agreement may alter
the following provisions in a default situation. See Subordination and Description of the
Intercreditor Agreement.
Payments of interest on the Deposits with respect to each Trust and payments of principal,
Make-Whole Amount (if any) and interest on the Equipment Notes or with respect to other Trust
Property held in each Trust will be distributed by the Paying Agent (in the case of Deposits) or by
the Trustee (in the case of Trust Property of such Trust) to Certificateholders of such Trust on
the date receipt of such payment is confirmed, except in the case of certain types of Special
Payments.
April 15 and October 15 of each year are referred to herein as Regular Distribution Dates
(each Regular Distribution Date and Special Distribution Date, a Distribution Date).
Interest
The Deposits held with respect to each Trust and the Equipment Notes held in each Trust will
accrue interest at the applicable rate per annum for the applicable class of Certificates, payable
on each Regular Distribution Date commencing on October 15, 2011, except as described under
Description of the Deposit Agreements Other Withdrawals and Return of Deposits. The rate per
annum for the Class B Certificates is set forth on the cover page of this prospectus supplement,
and the rate per annum for the Class A Certificates is 5.30%. The interest rate applicable to each
class of Certificates, as described in the previous sentence, is referred to as the Stated
Interest Rate for such class of Certificates and the related Trust. Interest payments will be
distributed to Certificateholders of such Trust on each Regular Distribution Date until the final
Distribution Date for such Trust, subject to the Intercreditor Agreement. Interest on the Deposits
and on the Equipment Notes will be calculated on the basis of a 360-day year, consisting of twelve
30-day months.
Distributions of interest on the Class A Certificates and Class B Certificates will be
supported by a separate Liquidity Facility provided by the applicable Liquidity Provider for the
benefit of the holders of such Certificates, each of which is expected to provide an aggregate
amount sufficient to distribute interest on the Pool Balance thereof at the Stated Interest Rate
for such Certificates on up to three successive semiannual Regular Distribution Dates (without
regard to any future distributions of principal on such Certificates), except that no Liquidity
Facility will cover interest payable by the Depositary on the Deposits relating to the applicable
Trust. The Liquidity Facility for any class of Certificates does not provide for drawings
thereunder to pay for principal or Make-Whole Amount with respect to such Certificates, any
interest with respect to such Certificates in excess of their Stated Interest Rate, or,
notwithstanding the subordination provisions of the Intercreditor Agreement, principal, interest,
or Make-Whole Amount with respect to the Certificates of any other class. Therefore, only the
holders of the Class A Certificates and Class B Certificates will be entitled to receive and retain
the proceeds of drawings under the applicable Liquidity Facility. See Description of the Liquidity
Facilities.
Principal
The entire principal amount of the issued and outstanding Series B Equipment Notes is
scheduled for payment on October 15, 2014. Payments of principal on the issued and outstanding
Series A Equipment Notes are scheduled to be paid in specified amounts on April 15 and October 15
in certain years,
commencing on April 15, 2012. See Description of the Equipment NotesPrincipal and Interest
Payments.
Distributions
Payments of interest on the Deposits (other than as part of any withdrawals described in
Description of the Deposit Agreements Other Withdrawals and Return of Deposits) and payments
of interest on or
S-36
principal of the Equipment Notes (including drawings made under a Liquidity
Facility in respect of a shortfall of interest payable on any Certificate) scheduled to be made on
a Regular Distribution Date are referred to herein as Scheduled Payments. See Description of the
Equipment Notes Principal and Interest Payments. The Final Legal Distribution Date for the
Class A Certificates is October 15, 2020 and for the Class B Certificates is April 15, 2016.
The Paying Agent with respect to each Escrow Agreement will distribute on each Regular
Distribution Date to the Certificateholders of the Trust to which such Escrow Agreement relates all
Scheduled Payments received in respect of the related Deposits, the receipt of which is confirmed
by the Paying Agent on such Regular Distribution Date. Subject to the Intercreditor Agreement, on
each Regular Distribution Date, the Trustee of each Trust will distribute to the Certificateholders
of such Trust all Scheduled Payments received in respect of the Equipment Notes held on behalf of
such Trust, the receipt of which is confirmed by such Trustee on such Regular Distribution Date.
Each Certificateholder of each Trust will be entitled to receive its proportionate share, based
upon its fractional interest in such Trust, of any distribution in respect of Scheduled Payments of
interest on Deposits relating to such Trust, and, subject to the Intercreditor Agreement, each
Certificateholder of each Trust will be entitled to receive its proportionate share, based upon its
fractional interest in such Trust, of any distribution in respect of Scheduled Payments of
principal of or interest on the Equipment Notes held on behalf of such Trust. Each such
distribution of Scheduled Payments will be made by the applicable Paying Agent or the applicable
Trustee, as the case may be, to the Certificateholders of record of the relevant Trust on the
record date applicable to such Scheduled Payment (generally, 15 days prior to each Regular
Distribution Date), subject to certain exceptions. (Basic Agreement, Sections 1.01 and 4.02(a);
Escrow Agreements, Section 2.03(a)) If a Scheduled Payment is not received by the applicable Paying
Agent or the applicable Trustee, as the case may be, on a Regular Distribution Date but is received
within five days thereafter, it will be distributed on the date received to such holders of record.
If it is received after such five-day period, it will be treated as a Special Payment and
distributed as described below. (Intercreditor Agreement, Section 1.01; Escrow Agreements, Section
2.03(d))
Any payment in respect of, or any proceeds of, any Equipment Note or the collateral under any
Indenture (the Collateral) other than a Scheduled Payment (each, a Special Payment) will be
distributed on, in the case of an early redemption or a purchase of any Equipment Note, the date of
such early redemption or purchase (which will be a Business Day), and otherwise on the Business Day
specified for distribution of such Special Payment pursuant to a notice delivered by each Trustee
(as described below) as soon as practicable after the Trustee has received notice of such Special
Payment, or has received the funds for such Special Payment (each, a Special Distribution Date).
Any such distribution will be subject to the Intercreditor Agreement. (Basic Agreement, Sections
4.02(b) and (c); Trust Supplements, Section 7.01(d))
Any Deposits withdrawn because a Triggering Event occurs, and any unused Deposits remaining as
of the Delivery Period Termination Date, will be distributed, together with accrued and unpaid
interest thereon, but without any premium (each, also a Special Payment), on a date no earlier
than 15 days after the Paying Agent has received notice of the event requiring such distribution
(also, a Special Distribution Date). However, if the day scheduled for such withdrawal is within
10 days before or after a Regular Distribution Date, the Escrow Agent will request that such
withdrawal be made on such Regular Distribution Date. (Escrow Agreements, Sections 1.02(f), 2.03(b)
and 2.06) Any such distribution will not be subject to the Intercreditor Agreement.
Triggering Event means (i) the occurrence of an Indenture Event of Default under all of the
Indentures resulting in a PTC Event of Default with respect to the most senior class of
Certificates then outstanding, (ii) the acceleration of all of the outstanding Equipment Notes or
(iii) certain bankruptcy or insolvency events involving Delta. (Intercreditor Agreement, Section
1.01)
Any Deposits withdrawn because an Aircraft suffers a Delivery Period Event of Loss (or an
event that would constitute such a Delivery Period Event of Loss but for the requirement that
notice be given or time elapse or both) before such Aircraft is financed pursuant to this offering
will be distributed, together with accrued and unpaid interest thereon, but without any premium
(each, also a Special Payment), on a date
S-37
no earlier than 15 days after the Paying Agent has
received notice of the event requiring such distribution (also, a Special Distribution Date).
(Escrow Agreements, Sections 1.02(e), 2.03(b) and 2.07) Any such distribution will not be subject
to the Intercreditor Agreement.
Each Paying Agent, in the case of the Deposits, and each Trustee, in the case of the Trust
Property, will mail a notice to the Certificateholders of the applicable Trust stating the
scheduled Special Distribution Date, the related record date, the amount of the Special Payment
and, in the case of a distribution under the applicable Pass Through Trust Agreement, the reason
for the Special Payment. In the case of a redemption or purchase of the Equipment Notes held in the
related Trust or any withdrawal or return of Deposits described under Description of the Deposit
Agreements Other Withdrawals and Return of Deposits, such notice will be mailed not less than
15 days prior to the date such Special Payment is scheduled to be distributed, and in the case of
any other Special Payment, such notice will be mailed as soon as practicable after the Trustee has
confirmed that it has received funds for such Special Payment. (Basic Agreement, Section 4.02(c);
Trust Supplements, Section 7.01(d); Escrow Agreements, Sections 2.06 and 2.07) Each distribution of
a Special Payment, other than a Final Distribution, on a Special Distribution Date for any Trust
will be made by the Paying Agent or the Trustee, as applicable, to the Certificateholders of record
of such Trust on the record date applicable to such Special Payment. (Basic Agreement, Section
4.02(b); Escrow Agreements, Section 2.03(b)) See Indenture Events of Default and Certain Rights
Upon an Indenture Event of Default and Description of the Equipment Notes Redemption.
Each Pass Through Trust Agreement requires that the Trustee establish and maintain, for the
related Trust and for the benefit of the Certificateholders of such Trust, one or more non-interest
bearing accounts (the Certificate Account) for the deposit of payments representing Scheduled
Payments received by such Trustee. (Basic Agreement, Section 4.01) Each Pass Through Trust
Agreement requires that the Trustee establish and maintain, for the related Trust and for the
benefit of the Certificateholders of such Trust, one or more accounts (the Special Payments
Account) for the deposit of payments representing Special Payments received by such Trustee, which
will be non-interest bearing except in certain limited circumstances where the Trustee may invest
amounts in such account in certain Permitted Investments. (Basic Agreement, Section 4.01; Trust
Supplements, Section 7.01(c)) Pursuant to the terms of each Pass Through Trust Agreement, the
Trustee is required to deposit any Scheduled Payments relating to the applicable Trust received by
it in the Certificate Account of such Trust and to deposit any Special Payments received by it in
the Special Payments Account of such Trust. (Basic Agreement, Section 4.01; Trust Supplements,
Section 7.01(c)) All amounts so deposited will be distributed by the Trustee on a Regular
Distribution Date or a Special Distribution Date, as appropriate. (Basic Agreement, Section 4.02)
Each Escrow Agreement requires that the Paying Agent establish and maintain, for the benefit
of the applicable Receiptholders, an account (the Paying Agent Account), which will be
non-interest bearing, and the Paying Agent is under no obligation to invest any amounts held in the
Paying Agent Account. (Escrow Agreements, Section 2.02) Pursuant to the terms of the Deposit
Agreements, the Depositary agrees to pay interest payable on Deposits and amounts withdrawn from
the Deposits as described under Description of the Deposit Agreements Other Withdrawals and
Return of Deposits, in accordance with the applicable Deposit Agreement, directly into the related
Paying Agent Account. (Deposit Agreements, Section 4) All amounts so deposited in the Paying Agent
Accounts will be distributed by the Paying Agent on a Regular Distribution Date or Special
Distribution Date, as appropriate. See Description of the Deposit Agreements.
The Final Distribution for each Trust will be made only upon presentation and surrender of the
Certificates for such Trust at the office or agency of the Trustee specified in the notice given by
the Trustee of such Final Distribution. (Basic Agreement, Section 11.01) See Termination of the
Trusts below. Distributions in respect of Certificates issued in global form will be made as
described in Book-Entry Registration; Delivery and Form below.
If any Regular Distribution Date or Special Distribution Date is not a Business Day,
distributions scheduled to be made on such Regular Distribution Date or Special Distribution Date
will be made on the next succeeding Business Day and interest will not be added for such additional
period. (Basic Agreement, Section 12.11; Trust Supplements, Sections 3.02(c) and 3.02(d))
S-38
Business Day means, with respect to Certificates of any class, any day (a) other than a
Saturday, a Sunday or a day on which commercial banks are required or authorized to close in New
York, New York, Atlanta, Georgia, Wilmington, Delaware, or, so long as any Certificate of such
class is outstanding, the city and state in which the Trustee, the Subordination Agent or any
related Loan Trustee maintains its corporate trust office or receives and disburses funds, and (b)
solely with respect to drawings under any Liquidity Facility, which is also a Business Day as
defined in such Liquidity Facility. (Intercreditor Agreement, Section 1.01)
Subordination
The Certificates are subject to subordination terms set forth in the Intercreditor Agreement.
See Description of the Intercreditor Agreement Priority of Distributions.
Pool Factors
The Pool Balance of the Certificates issued by any Trust indicates, as of any date, the
original aggregate face amount of the Certificates of such Trust less the aggregate amount of all
distributions made as of such date in respect of the Certificates of such Trust or in respect of
Deposits relating to such Trust, other than distributions made in respect of interest or Make-Whole
Amount or reimbursement of any costs and expenses incurred in connection therewith. The Pool
Balance of the Certificates issued by any Trust as of any date will be computed after giving effect
to any special distribution with respect to unused Deposits relating to such Trust, payment of
principal, if any, on the Equipment Notes or payment with respect to other Trust Property held in
such Trust and the distribution thereof to be made on such date. (Trust Supplements, Section 1.01;
Intercreditor Agreement, Section 1.01)
The Pool Factor for each Trust as of any Distribution Date is the quotient (rounded to the
seventh decimal place) computed by dividing (i) the Pool Balance of such Trust by (ii) the original
aggregate face amount of the Certificates of such Trust. The Pool Factor for each Trust as of any
Distribution Date will be computed after giving effect to any special distribution with respect to
unused Deposits, payment of principal, if any, on the Equipment Notes or payments with respect to
other Trust Property held in such Trust and the distribution thereof to be made on that date.
(Trust Supplements, Section 1.01) The Pool Factor of each Trust will be 1.0000000 on the date of
issuance of the Class B Certificates (the Class B Issuance Date); thereafter, the Pool Factor for
each Trust will decline as described herein to reflect reductions in the Pool Balance of such
Trust. The amount of a Certificateholders pro rata share of the Pool Balance of a Trust can be
determined by multiplying the original denomination of the Certificateholders Certificate of such
Trust by the Pool Factor for such Trust as of the applicable Distribution Date. Notice of the Pool
Factor and the Pool Balance for each Trust will be mailed to Certificateholders of such Trust on
each Distribution Date. (Trust Supplements, Section 5.01(a))
The following table sets forth the expected aggregate principal amortization schedule (the
Assumed Amortization Schedule) for the Equipment Notes held in each Trust and resulting Pool
Factors with respect to such Trust, assuming that each Aircraft has been subjected to an Indenture
on or prior to October 14, 2011 and that all of the Equipment Notes related to such Aircraft have
been acquired by the related Trust by such date. The actual aggregate principal amortization
schedule applicable to a Trust and the resulting Pool Factors with respect to such Trust may
differ from the Assumed Amortization Schedule because the scheduled distribution of principal
payments for any Trust may be affected if, among other things, any Equipment Notes held in such
Trust are redeemed or purchased, if a default in payment on any Equipment Note occurs, or if any
Aircraft is not subjected to an Indenture and the related Equipment Notes are not acquired by such
Trust.
S-39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
Class B |
|
|
Scheduled |
|
|
|
|
|
Scheduled |
|
|
|
|
Principal |
|
Expected Pool |
|
Principal |
|
Expected Pool |
Date |
|
Payments |
|
Factor |
|
Payments |
|
Factor |
Issuance Date |
|
$ |
0.00 |
|
|
|
1.0000000 |
|
|
$ |
0.00 |
|
|
|
1.0000000 |
|
October 15, 2011 |
|
|
0.00 |
|
|
|
1.0000000 |
|
|
|
0.00 |
|
|
|
1.0000000 |
|
April 15, 2012 |
|
|
20,225,000.00 |
|
|
|
0.9309137 |
|
|
|
0.00 |
|
|
|
1.0000000 |
|
October 15, 2012 |
|
|
19,225,000.00 |
|
|
|
0.8652434 |
|
|
|
0.00 |
|
|
|
1.0000000 |
|
April 15, 2013 |
|
|
18,000,000.00 |
|
|
|
0.8037575 |
|
|
|
0.00 |
|
|
|
1.0000000 |
|
October 15, 2013 |
|
|
12,000,000.00 |
|
|
|
0.7627669 |
|
|
|
0.00 |
|
|
|
1.0000000 |
|
April 15, 2014 |
|
|
12,000,000.00 |
|
|
|
0.7217763 |
|
|
|
0.00 |
|
|
|
1.0000000 |
|
October 15, 2014 |
|
|
12,000,000.00 |
|
|
|
0.6807857 |
|
|
|
102,000,000.00 |
|
|
|
0.0000000 |
|
April 15, 2015 |
|
|
12,000,000.00 |
|
|
|
0.6397950 |
|
|
|
0.00 |
|
|
|
0.0000000 |
|
October 15, 2015 |
|
|
12,000,000.00 |
|
|
|
0.5988044 |
|
|
|
0.00 |
|
|
|
0.0000000 |
|
April 15, 2016 |
|
|
12,000,000.00 |
|
|
|
0.5578138 |
|
|
|
0.00 |
|
|
|
0.0000000 |
|
October 15, 2016 |
|
|
11,000,000.00 |
|
|
|
0.5202391 |
|
|
|
0.00 |
|
|
|
0.0000000 |
|
April 15, 2017 |
|
|
11,000,000.00 |
|
|
|
0.4826644 |
|
|
|
0.00 |
|
|
|
0.0000000 |
|
October 15, 2017 |
|
|
11,000,000.00 |
|
|
|
0.4450897 |
|
|
|
0.00 |
|
|
|
0.0000000 |
|
April 15, 2018 |
|
|
11,000,000.00 |
|
|
|
0.4075149 |
|
|
|
0.00 |
|
|
|
0.0000000 |
|
October 15, 2018 |
|
|
11,000,000.00 |
|
|
|
0.3699402 |
|
|
|
0.00 |
|
|
|
0.0000000 |
|
April 15, 2019 |
|
|
108,300,000.00 |
|
|
|
0.0000000 |
|
|
|
0.00 |
|
|
|
0.0000000 |
|
If the Pool Factor and Pool Balance of a Trust differ from the Assumed Amortization
Schedule for such Trust, notice thereof will be provided to the Certificateholders of such Trust as
described hereafter. The Pool Factor and Pool Balance of each Trust will be recomputed if there has
been an early redemption, purchase or default in the payment of principal or interest in respect of
one or more of the Equipment Notes held in a Trust, as described in Indenture Events of Default
and Certain Rights Upon an Indenture Event of Default and Description of the Equipment Notes
Redemption, or a special distribution of unused Deposits attributable to (a) the occurrence of a
Delivery Period Event of Loss (or an event that would constitute such a Delivery Period Event of
Loss but for the requirement that notice be given or time elapse or both) with respect to an
Aircraft before such Aircraft is financed pursuant to this offering, (b) the occurrence of a
Triggering Event or (c) unused Deposits remaining after the Delivery Period Termination Date, in
each case as described in Description of the Deposit Agreements Other Withdrawals and Return of
Deposits. If the aggregate principal payments scheduled for a Regular Distribution Date prior to
the Delivery Period Termination Date will not be as set forth in the Assumed Amortization Schedule
for a Trust, notice thereof will be mailed to the Certificateholders of such Trust by no later than
the 15th day prior to such Regular Distribution Date. Promptly following (i) the Delivery Period
Termination Date or, if applicable, the date any unused Deposits are withdrawn following the
Delivery Period Termination Date, if there has been, on or prior to such date, (x) any change in
the Pool Factor and the scheduled payments from the Assumed Amortization Schedule or (y) any such
redemption, purchase, default or special distribution and (ii) the date of any such redemption,
purchase, default or special distribution occurring after the Delivery Period Termination Date or,
if applicable the date any unused Deposits are withdrawn following the Delivery Period Termination
Date, the Pool Factor, Pool Balance and expected principal payment schedule of each Trust will be
recomputed after giving effect thereto and notice thereof will be mailed to the Certificateholders
of such Trust. (Trust Supplements, Sections 5.01(c) and 5.01(d)) See Reports to
Certificateholders, Certificate Buyout Right of Class B Certificateholders, and Description
of the Deposit Agreements.
Reports to Certificateholders
On each Distribution Date, the applicable Trustee will include with each distribution by it of
a Scheduled Payment or Special Payment to the Certificateholders of the related Trust a statement,
giving effect to such distribution to be made on such Distribution Date, setting forth the
following information (per $1,000 aggregate principal amount of Certificates as to items (2), (3),
(4) and (5) below):
S-40
|
(1) |
|
the aggregate amount of funds distributed on such Distribution Date under the
related Pass Through Trust Agreement and under the related Escrow Agreement,
indicating the amount, if any, allocable to each source, including any portion thereof
paid by the applicable Liquidity Provider; |
|
|
(2) |
|
the amount of such distribution under the related Pass Through Trust
Agreement allocable to principal and the amount allocable to Make-Whole Amount (if
any); |
|
|
(3) |
|
the amount of such distribution under the related Pass Through Trust
Agreement allocable to interest, indicating any portion thereof paid by the applicable
Liquidity Provider; |
|
|
(4) |
|
the amount of such distribution under the related Escrow Agreement allocable
to interest, if any; |
|
|
(5) |
|
the amount of such distribution under the related Escrow Agreement allocable
to unused Deposits, if any; and |
|
|
(6) |
|
the Pool Balance and the Pool Factor for such Trust. (Trust Supplements,
Section 5.01) |
As long as the Certificates are registered in the name of The Depository Trust Company (DTC)
or its nominee (including Cede & Co. (Cede)), on the record date prior to each Distribution Date,
the applicable Trustee will request that DTC post on its Internet bulletin board a securities
position listing setting forth the names of all DTC Participants reflected on DTCs books as
holding interests in the applicable Certificates on such record date. On each Distribution Date,
the applicable Trustee will mail to each such DTC Participant the statement described above and
will make available additional copies as requested by such DTC Participant for forwarding to
Certificate Owners. (Trust Supplements, Section 5.01(a))
In addition, after the end of each calendar year, the applicable Trustee will furnish to each
person who at any time during the preceding calendar year was a Certificateholder of record of such
Trust a report containing the sum of the amounts determined pursuant to clauses (1), (2), (3), (4)
and (5) above with respect to the applicable Trust for such calendar year or, if such person was a
Certificateholder during only a portion of such calendar year, for the applicable portion of such
calendar year, and such other items as are readily available to such Trustee and which a
Certificateholder reasonably requests as necessary for the purpose of such Certificateholders
preparation of its U.S. federal income tax returns or foreign income tax returns. (Trust
Supplements, Section 5.01(b)) Such report and such other items will be prepared on the basis of
information supplied to the applicable Trustee by the DTC Participants and will be delivered by
such Trustee to such DTC Participants to be available for forwarding by such DTC Participants to
Certificate Owners. (Trust Supplements, Section 5.01(b))
At such time, if any, as Certificates are issued in the form of Definitive Certificates, the
applicable Trustee will prepare and deliver the information described above to each
Certificateholder of record of the applicable Trust as the name and period of record ownership of
such Certificateholder appears on the records of the registrar of the applicable Certificates.
Indenture Events of Default and Certain Rights Upon an Indenture Event of Default
Since the Equipment Notes issued under an Indenture will be held in more than one Trust, a
continuing Indenture Event of Default would affect the Equipment Notes held by each such Trust. See
Description of Equipment Notes Indenture Events of Default, Notice and Waiver for a list of
Indenture Events of Default.
As the same institution will act as Trustee of multiple Trusts, such Trustee could be faced
with a potential conflict of interest upon an Indenture Event of Default. In such event, each
Trustee has indicated that it would resign as Trustee of one or all such Trusts, and a successor
trustee would be appointed in
S-41
accordance with the terms of the applicable Pass Through Trust Agreement. U.S. Bank Trust
National Association is the initial Trustee for the Class A Trust and will be the initial Trustee
for the Class B Trust. (Basic Agreement, Sections 7.08 and 7.09)
Upon the occurrence and during the continuation of an Indenture Event of Default under an
Indenture, the Controlling Party may direct the Loan Trustee under such Indenture to accelerate the
Equipment Notes issued thereunder and may direct the Loan Trustee under such Indenture in the
exercise of remedies thereunder and may sell all (but not less than all) of such Equipment Notes or
foreclose and sell the Collateral under such Indenture to any person, subject to certain
limitations. See Description of the Intercreditor Agreement Intercreditor Rights Limitation
on Exercise of Remedies. The proceeds of any such sale will be distributed pursuant to the
provisions of the Intercreditor Agreement. Any such proceeds so distributed to any Trustee upon any
such sale will be deposited in the applicable Special Payments Account and will be distributed to
the Certificateholders of the applicable Trust on a Special Distribution Date. (Basic Agreement,
Sections 4.01 and 4.02; Trust Supplements, Sections 7.01(c) and 7.01(d))
The market for Aircraft or Equipment Notes during the continuation of any Indenture Event of
Default may be limited and there can be no assurance as to whether they could be sold or the price
at which they could be sold. If any Equipment Notes are sold for less than their outstanding
principal amount, or any Aircraft are sold for less than the outstanding principal amount of the
related Equipment Notes, certain Certificateholders will receive a smaller amount of principal
distributions than anticipated and will not have any claim for the shortfall against Delta (except
in the case that Aircraft are sold for less than the outstanding principal amount of the related
Equipment Notes), any Liquidity Provider or any Trustee. Neither the Trustee of the Trust holding
such Equipment Notes nor the Certificateholders of such Trust, furthermore, could take action with
respect to any remaining Equipment Notes held in such Trust as long as no Indenture Event of
Default existed with respect thereto.
Any amount, other than Scheduled Payments received on a Regular Distribution Date or within
five days thereafter, distributed to the Trustee of any Trust by the Subordination Agent on account
of the Equipment Notes or other Trust Property held in such Trust following an Indenture Event of
Default under any Indenture will be deposited in the Special Payments Account for such Trust and
will be distributed to the Certificateholders of such Trust on a Special Distribution Date. (Basic
Agreement, Sections 4.01 and 4.02(b); Trust Supplements, Sections 1.01 and 7.01(c); Intercreditor
Agreement, Sections 1.01, 2.03(b) and 2.04)
Any funds representing payments received with respect to any defaulted Equipment Notes, or the
proceeds from the sale of any Equipment Notes, held by the Trustee in the Special Payments Account
for such Trust will, to the extent practicable, be invested and reinvested by such Trustee in
certain Permitted Investments pending the distribution of such funds on a Special Distribution
Date. (Basic Agreement, Section 4.04) Permitted Investments are defined as obligations of the
United States or agencies or instrumentalities thereof the payment of which is backed by the full
faith and credit of the United States and which mature in not more than 60 days after they are
acquired or such lesser time as is required for the distribution of any Special Payments on a
Special Distribution Date. (Basic Agreement, Section 1.01)
Each Pass Through Trust Agreement provides that the Trustee of the related Trust will, within
90 days after the occurrence of a default (as defined below) known to it, notify the
Certificateholders of such Trust by mail of such default, unless such default has been cured or
waived; provided that, (i) in the case of defaults not relating to the payment of money, such
Trustee will not give notice until the earlier of the time at which such default becomes an
Indenture Event of Default and the expiration of 60 days from the occurrence of such default, and
(ii) except in the case of default in a payment of principal, Make-Whole Amount (if any), or
interest on any of the Equipment Notes held in such Trust, the applicable Trustee will be protected
in withholding such notice if it in good faith determines that the withholding of such notice is in
the interests of such Certificateholders. (Basic Agreement, Section 7.02) For the purpose of the
provision described in this paragraph only, the term default with respect to a Trust means an
event that is, or after notice or lapse of time or both would become, an event of default with
respect to such Trust or a Triggering
Event under the Intercreditor Agreement, and the term event of default with respect to a
Trust means an
S-42
Indenture Event of Default under any Indenture pursuant to which Equipment Notes
held by such Trust were issued.
Each Pass Through Trust Agreement contains a provision entitling the Trustee of the related
Trust, subject to the duty of such Trustee during a default to act with the required standard of
care, to be offered reasonable security or indemnity by the Certificateholders of such Trust before
proceeding to exercise any right or power under such Pass Through Trust Agreement or the
Intercreditor Agreement at the request of such Certificateholders. (Basic Agreement, Section
7.03(e))
Subject to certain qualifications set forth in each Pass Through Trust Agreement and to
certain limitations set forth in the Intercreditor Agreement, the Certificateholders of each Trust
holding Certificates evidencing fractional undivided interests aggregating not less than a majority
in interest in such Trust will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee with respect to such Trust or pursuant to
the terms of the Intercreditor Agreement or the applicable Liquidity Facility, or exercising any
trust or power conferred on such Trustee under such Pass Through Trust Agreement, the Intercreditor
Agreement, or such Liquidity Facility, including any right of such Trustee as Controlling Party
under the Intercreditor Agreement or as a Noteholder. (Basic Agreement, Section 6.04) See
Description of the Intercreditor Agreement Intercreditor Rights Controlling Party.
Subject to the Intercreditor Agreement, the Certificateholders of a Trust evidencing
fractional undivided interests aggregating not less than a majority in interest of such Trust may
on behalf of all Certificateholders of such Trust waive any past Indenture Event of Default or
default under the related Pass Through Trust Agreement and its consequences or, if the Trustee of
such Trust is the Controlling Party, may direct such Trustee to so instruct the applicable Loan
Trustee; provided, however, that the consent of each Certificateholder of a Trust is required to
waive (i) a default in the deposit of any Scheduled Payment or Special Payment or in the
distribution thereof, (ii) a default in payment of the principal, Make-Whole Amount (if any) or
interest with respect to any of the Equipment Notes held in such Trust or (iii) a default in
respect of any covenant or provision of the related Pass Through Trust Agreement that cannot be
modified or amended without the consent of each Certificateholder of such Trust affected thereby.
(Basic Agreement, Section 6.05) Each Indenture will provide that, with certain exceptions, the
holders of the majority in aggregate unpaid principal amount of the Equipment Notes issued
thereunder may on behalf of all such holders waive any past default or Indenture Event of Default
thereunder. Notwithstanding such provisions of the Indentures, pursuant to the Intercreditor
Agreement only the Controlling Party will be entitled to waive any such past default or Indenture
Event of Default. See Description of the Intercreditor Agreement Intercreditor Rights
Controlling Party.
Certificate Buyout Right of Class B Certificateholders
After the occurrence and during the continuation of a Certificate Buyout Event, with ten days
prior written irrevocable notice to the Class A Trustee, the Class B Trustee and each other Class B
Certificateholder, each Class B Certificateholder (other than Delta or any of its affiliates), will
have the right to purchase all, but not less than all, of the Class A Certificates on the third
Business Day next following the expiry of such ten-day notice period.
If Refinancing Certificates are issued, holders of such Refinancing Certificates will have the
same right (subject to the same terms and conditions) to purchase the Class A Certificates as the
holders of the Class B Certificates that such Refinancing Certificates refinanced. See Possible
Refinancing of Class B Certificates.
The purchase price with respect to the Class A Certificates will be equal to the Pool Balance
of the Class A Certificates plus accrued and unpaid interest thereon to the date of purchase,
without any premium, but including any other amounts then due and payable to the Class A
Certificateholders under the Class A Pass Through Trust Agreement, the Intercreditor Agreement, the
Class A Escrow Agreement, any Series A Equipment Note held as part of the Trust Property of the
Class A Trust or the related Indenture and
Participation Agreement or on or in respect of the Class A Certificates; provided, however,
that if such
S-43
purchase occurs after (i) a record date specified in the Class A Escrow Agreement
relating to the distribution of unused Class A Deposits and/or accrued and unpaid interest on Class
A Deposits and prior to or on the related distribution date under the Class A Escrow Agreement,
such purchase price will be reduced by the aggregate amount of unused Class A Deposits and/or
interest to be distributed under the Class A Escrow Agreement (which deducted amounts will remain
distributable to, and may be retained by, the Class A Certificateholders as of such record date),
or (ii) the record date under the Class A Pass Through Trust Agreement relating to any Distribution
Date, such purchase price will be reduced by the amount to be distributed thereunder on such
related Distribution Date (which deducted amounts will remain distributable to, and may be retained
by, the Class A Certificateholders as of such record date). Such purchase right may be exercised by
any Class B Certificateholder entitled to such right.
If prior to the end of the ten-day notice period, any other Class B Certificateholder(s)
notifies the purchasing Class B Certificateholder that such other Class B Certificateholder(s)
want(s) to participate in such purchase, then such other Class B Certificateholder(s) may join with
the purchasing Class B Certificateholder to purchase the Class A Certificates pro rata based on the
interest in the Class B Trust held by each purchasing Class B Certificateholder. Upon consummation
of such a purchase, no other Class B Certificateholder will have the right to purchase the Class A
Certificates during the continuance of such Certificate Buyout Event. If Delta or any of its
affiliates is a Class B Certificateholder, it will not have the purchase rights described above.
(Trust Supplements, Section 6.01)
A Certificate Buyout Event means that a Delta Bankruptcy Event has occurred and is
continuing and either of the following events has occurred: (A) (i) the 60-day period specified in
Section 1110(a)(2)(A) of the Bankruptcy Code (the 60-Day Period) has expired and (ii) Delta has
not entered into one or more agreements under Section 1110(a)(2)(A) of the Bankruptcy Code to
perform all of its obligations under all of the Indentures and has not cured defaults thereunder in
accordance with Section 1110(a)(2)(B) of the Bankruptcy Code or, if it has entered into such
agreements, has at any time thereafter failed to cure any default under any of the Indentures in
accordance with Section 1110(a)(2)(B) of the Bankruptcy Code; or (B) if prior to the expiry of the
60-Day Period, Delta will have abandoned any Aircraft. (Intercreditor Agreement, Section 1.01)
PTC Event of Default
A PTC Event of Default with respect to each Pass Through Trust Agreement and the related
class of Certificates means the failure to distribute within ten Business Days after the applicable
Distribution Date either:
|
|
|
the outstanding Pool Balance of such class of Certificates on the Final Legal
Distribution Date for such class; or |
|
|
|
|
the interest scheduled for distribution on such class of Certificates on any
Distribution Date (unless the Subordination Agent has made an Interest Drawing, or a
withdrawal from the Cash Collateral Account for such class of Certificates, in an
aggregate amount sufficient to pay such interest and has distributed such amount to the
Trustee entitled thereto). (Intercreditor Agreement, Section 1.01) |
Any failure to make expected principal distributions with respect to any class of Certificates
on any Regular Distribution Date (other than the Final Legal Distribution Date) will not constitute
a PTC Event of Default with respect to such Certificates.
A PTC Event of Default with respect to the most senior outstanding class of Certificates
resulting from an Indenture Event of Default under all Indentures will constitute a Triggering
Event.
S-44
Merger, Consolidation and Transfer of Assets
Delta will be prohibited from consolidating with or merging into any other entity where Delta
is not the surviving entity or conveying, transferring, or leasing substantially all of its assets
as an entirety to any other entity unless:
|
|
|
the successor or transferee entity is organized and validly existing under the laws of
the United States or any state thereof or the District of Columbia; |
|
|
|
|
the successor or transferee entity is, if and to the extent required under Section 1110
in order that the Loan Trustee continues to be entitled to any benefits of Section 1110
with respect to an Aircraft, a citizen of the United States (as defined in Title 49 of
the United States Code relating to aviation (the Transportation Code)) holding an air
carrier operating certificate issued by the Secretary of Transportation pursuant to
Chapter 447 of the Transportation Code; |
|
|
|
|
the successor or transferee entity expressly assumes all of the obligations of Delta
contained in the Basic Agreement and any Trust Supplement, the Note Purchase Agreement,
the Equipment Notes, the Indentures and the Participation Agreements; |
|
|
|
|
if the Aircraft are, at the time, registered with the FAA or such person is located in
a Contracting State (as such term is used in the Cape Town Treaty), the transferor or
successor entity makes such filings and recordings with the FAA pursuant to the
Transportation Code and registrations under the Cape Town Treaty, or, if the Aircraft are,
at the time, not registered with the FAA, the transferor or successor entity makes such
filings and recordings with the applicable aviation authority, as are necessary to
evidence such consolidation, merger, conveyance, transfer or lease; and |
|
|
|
|
Delta has delivered a certificate and an opinion or opinions of counsel indicating that
such transaction, in effect, complies with such conditions. |
In addition, after giving effect to such transaction, no Indenture Event of Default shall have
occurred and be continuing. (Basic Agreement, Section 5.02; Trust Supplements, Section 8.01;
Participation Agreements, Section 6.02(e); Note Purchase Agreement, Section 4(a)(iii))
None of the Certificates, Equipment Notes or underlying agreements will contain any covenants
or provisions which may afford the applicable Trustee or Certificateholders protection in the event
of a highly leveraged transaction, including transactions effected by management or affiliates,
which may or may not result in a change in control of Delta.
Modification of the Pass Through Trust Agreements and Certain Other Agreements
Each Pass Through Trust Agreement contains provisions permitting Delta and the Trustee thereof
to enter into one or more agreements supplemental to such Pass Through Trust Agreement or, at the
request of Delta, permitting or requesting the execution of amendments or agreements supplemental
to the related Deposit Agreement, the related Escrow Agreement, the Intercreditor Agreement, the
Note Purchase Agreement, any of the Participation Agreements or any Liquidity Facility, without the
consent of any Certificateholder of such Trust to, among other things:
|
|
|
evidence the succession of another corporation or entity to Delta and the assumption by
such corporation or entity of the covenants of Delta contained in such Pass Through Trust
Agreement or of Deltas obligations under the Intercreditor Agreement, the Note Purchase
Agreement, any Participation Agreement or any Liquidity Facility; |
S-45
|
|
|
add to the covenants of Delta for the benefit of holders of any Certificates or
surrender any right or power conferred upon Delta in such Pass Through Trust Agreement,
the Intercreditor Agreement, the Note Purchase Agreement, any Participation Agreement or
any Liquidity Facility; |
|
|
|
|
cure any ambiguity or correct any mistake or inconsistency contained in the Basic
Agreement, any related Trust Supplement, the related Deposit Agreement, the related Escrow
Agreement, the Intercreditor Agreement, the Note Purchase Agreement, any Participation
Agreement or any Liquidity Facility; |
|
|
|
|
make or modify any other provision with respect to matters or questions arising under
the Basic Agreement, any related Trust Supplement, the related Deposit Agreement, the
related Escrow Agreement, the Intercreditor Agreement, the Note Purchase Agreement, any
Participation Agreement or any Liquidity Facility as Delta may deem necessary or desirable
and that will not materially adversely affect the interests of the holders of the related
Certificates; |
|
|
|
|
comply with any requirement of the SEC, any applicable law, rules or regulations of any
exchange or quotation system on which any Certificates are listed (or to facilitate any
listing of any Certificates on any exchange or quotation system) or any requirement of DTC
or like depositary or of any regulatory body; |
|
|
|
|
modify, eliminate or add to the provisions of such Pass Through Trust Agreement, the
related Deposit Agreement, the related Escrow Agreement, the Intercreditor Agreement, the
Note Purchase Agreement, any Participation Agreement or any Liquidity Facility, to the
extent necessary to establish, continue or obtain the qualification of such Pass Through
Trust Agreement (including any supplemental agreement), the related Deposit Agreement, the
related Escrow Agreement, the Intercreditor Agreement, the Note Purchase Agreement, any
Participation Agreement or any Liquidity Facility under the Trust Indenture Act of 1939,
as amended (the Trust Indenture Act), or under any similar federal statute enacted after
the date of such Pass Through Trust Agreement, and with certain exceptions, add to such
Pass Through Trust Agreement, the related Deposit Agreement, the related Escrow Agreement,
the Intercreditor Agreement, the Note Purchase Agreement, any Participation Agreement or
any Liquidity Facility, such other provisions as may be expressly permitted by the Trust
Indenture Act; |
|
|
|
|
(i) evidence and provide for a successor Trustee under such Pass Through Trust
Agreement, the related Deposit Agreement, the related Escrow Agreement, the Intercreditor
Agreement, the Note Purchase Agreement, any Participation Agreement, any Indenture or any
Liquidity Facility with respect to one or more Trusts, (ii) evidence the substitution of a
Liquidity Provider with a replacement liquidity provider or to provide for any Replacement
Facility, all as provided in the Intercreditor Agreement, (iii) evidence the substitution
of the Depositary with a replacement depositary or provide for a replacement deposit
agreement, all as provided in the Note Purchase Agreement, (iv) evidence and provide for a
successor Escrow Agent or Paying Agent under the related Escrow Agreement or (v) add to or
change any of the provisions of such Pass Through Trust Agreement, the related Deposit
Agreement, the related Escrow Agreement, the Intercreditor Agreement, the Note Purchase
Agreement, any Participation Agreement or any Liquidity Facility as necessary to provide
for or facilitate the administration of the Trust under such Pass Through Trust Agreement
by more than one trustee or to provide multiple liquidity facilities for one or more
Trusts; |
|
|
|
|
provide certain information to the Trustee as required in such Pass Through Trust
Agreement; |
|
|
|
|
add to or change any provision of any Certificates, the Basic Agreement or any Trust
Supplement to the extent necessary to facilitate the issuance of such Certificates in
bearer form or to facilitate or provide for the issuance of such Certificates in global
form in addition to or in place of Certificates in certificated form; |
S-46
|
|
|
provide for the delivery of any agreement supplemental to such Pass Through Trust
Agreement or any Certificates in or by means of any computerized, electronic or other
medium, including by computer diskette; |
|
|
|
|
correct or supplement the description of any property of such Trust; |
|
|
|
|
modify, eliminate or add to the provisions of the Basic Agreement or any Trust
Supplement to reflect the substitution of a substitute aircraft for any Aircraft; or |
|
|
|
|
make any other amendments or modifications to such Pass Through Trust Agreement;
provided that such amendments or modifications will only apply to Certificates of one
class or more to be hereafter issued; |
provided, however, that no such supplemental agreement shall cause any Trust to become an
association taxable as a corporation for U.S. federal income tax purposes. (Basic Agreement,
Section 9.01; Trust Supplements, Section 8.02)
Each Pass Through Trust Agreement also contains provisions permitting Delta and the related
Trustee to enter into one or more agreements supplemental to such Pass Through Trust Agreement or,
at the request of Delta, permitting or requesting the execution of amendments or agreements
supplemental to any other Pass Through Trust Agreement, the related Deposit Agreement, the related
Escrow Agreement, the Intercreditor Agreement, the Note Purchase Agreement, any Certificate, any
Participation Agreement, any other operative document with respect to any Aircraft or any Liquidity
Facility, without the consent of the Certificateholders of the related Trust, to provide for the
issuance of Refinancing Certificates, the formation of related trusts, the purchase by such trusts
of the related equipment notes, the establishment of certain matters with respect to such
Refinancing Certificates, and other matters incidental thereto, all as provided in, and subject to
certain terms and conditions set forth in, the Note Purchase Agreement and the Intercreditor
Agreement. (Trust Supplements, Section 8.02) See Possible Refinancing of Class B Certificates.
Each Pass Through Trust Agreement also contains provisions permitting the execution, with the
consent of the Certificateholders of the related Trust evidencing fractional undivided interests
aggregating not less than a majority in interest of such Trust, of supplemental agreements adding
any provisions to or changing or eliminating any of the provisions of such Pass Through Trust
Agreement, the related Deposit Agreement, the related Escrow Agreement, the Intercreditor
Agreement, the Note Purchase Agreement or any Liquidity Facility to the extent applicable to such
Certificateholders or modifying the rights of such Certificateholders under such Pass Through Trust
Agreement, the related Deposit Agreement, the related Escrow Agreement, the Intercreditor
Agreement, the Note Purchase Agreement or any Liquidity Facility, except that no such supplemental
agreement may, without the consent of the holder of each outstanding Certificate adversely affected
thereby:
|
|
|
reduce in any manner the amount of, or delay the timing of, any receipt by the related
Trustee (or, with respect to the Deposits, the Receiptholders) of payments on the
Equipment Notes held in such Trust, or distributions in respect of any Certificate of such
Trust (or, with respect to the Deposits, payments upon the Deposits), or change the date
or place of any payment of any such Certificates or change the coin or currency in which
any such Certificate is payable, or impair the right of any Certificateholder of such
Trust to institute suit for the enforcement of any such payment or distribution when due; |
|
|
|
|
permit the disposition of any Equipment Note held in such Trust or otherwise deprive
such Certificateholders of the benefit of the ownership of the Equipment Notes in such
Trust, except as provided in such Pass Through Trust Agreement, the Intercreditor
Agreement or any applicable Liquidity Facility; |
S-47
|
|
|
alter the priority of distributions specified in the Intercreditor Agreement in a
manner materially adverse to the interests of any holders of any outstanding Certificates; |
|
|
|
|
modify certain amendment provisions in such Pass Through Trust Agreement, except to
increase the percentage of the aggregate fractional undivided interests of the related
Trust provided for in such Pass Through Trust Agreement, the consent of the
Certificateholders of which is required for any such supplemental agreement provided for
in such Pass Through Trust Agreement, or to provide that certain other provisions of such
Pass Through Trust Agreement cannot be modified or waived without the consent of each
Certificateholder of such class affected thereby; or |
|
|
|
|
cause any Trust to become an association taxable as a corporation for U.S. federal
income tax purposes. (Basic Agreement, Section 9.02; Trust Supplements, Section 8.03) |
Notwithstanding any other provision, no amendment or modification of the buyout rights
described in Certificate Buyout Right of Class B Certificateholders shall be effective unless
the Trustee of each class of Certificates affected by such amendment or modification shall have
consented thereto. (Trust Supplements, Section 8.04)
If a Trustee, as holder (or beneficial owner through the Subordination Agent) of any Equipment
Note in trust for the benefit of the Certificateholders of the relevant Trust or as Controlling
Party under the Intercreditor Agreement, receives (directly or indirectly through the Subordination
Agent) a request for a consent to any amendment, modification, waiver or supplement under any
Indenture, any Participation Agreement, any Equipment Note, the Note Purchase Agreement or certain
other related documents, then subject to the provisions described above in respect of modifications
for which consent of such Certificateholders is not required, such Trustee will forthwith send a
notice of such proposed amendment, modification, waiver or supplement to each Certificateholder of
the relevant Trust registered on the register of such Trust as of the date of such notice. Such
Trustee will request from the Certificateholders of such Trust a direction as to:
|
|
|
whether or not to take or refrain from taking (or direct the Subordination Agent to
take or refrain from taking) any action that a Noteholder of such Equipment Notes or the
Controlling Party has the option to direct; |
|
|
|
|
whether or not to give or execute (or direct the Subordination Agent to give or
execute) any waivers, consents, amendments, modifications or supplements as such a
Noteholder or as Controlling Party; and |
|
|
|
|
how to vote (or direct the Subordination Agent to vote) any such Equipment Note if a
vote has been called for with respect thereto. (Basic Agreement, Section 10.01;
Intercreditor Agreement, Section 8.01(b)) |
Provided such a request for a Certificateholder direction shall have been made, in directing
any action or casting any vote or giving any consent as Noteholder of any Equipment Note (or in
directing the Subordination Agent in any of the foregoing):
|
|
|
other than as the Controlling Party, such Trustee will vote for or give consent to any
such action with respect to such Equipment Note in the same proportion as that of (x) the
aggregate face amount of all Certificates actually voted in favor of or for giving consent
to such action by such direction of Certificateholders to (y) the aggregate face amount of
all outstanding Certificates of such Trust; and |
|
|
|
|
as the Controlling Party, such Trustee will vote as directed in such Certificateholder
direction by the Certificateholders evidencing fractional undivided interests aggregating
not less than a majority in interest in such Trust. (Basic Agreement, Section 10.01) |
S-48
For purposes of the immediately preceding paragraph, a Certificate is deemed actually voted
if the Certificateholder thereof has delivered to the applicable Trustee an instrument evidencing
such Certificateholders consent to such direction prior to one Business Day before such Trustee
directs such action or casts such vote or gives such consent. Notwithstanding the foregoing, but
subject to certain rights of the Certificateholders under the relevant Pass Through Trust Agreement
and subject to the Intercreditor Agreement, such Trustee may, in its own discretion and at its own
direction, consent and notify the relevant Loan Trustee of such consent (or direct the
Subordination Agent to consent and notify the relevant Loan Trustee of such consent) to any
amendment, modification, waiver or supplement under any related Indenture, Participation Agreement,
Equipment Note or the Note Purchase Agreement or certain other related documents, if an Indenture
Event of Default under any Indenture has occurred and is continuing, or if such amendment,
modification, waiver or supplement will not materially adversely affect the interests of such
Certificateholders. (Basic Agreement, Section 10.01)
Pursuant to the Intercreditor Agreement, with respect to any Indenture at any given time, the
Loan Trustee under such Indenture will be directed by the Subordination Agent (as directed by the
respective Trustees or by the Controlling Party, as applicable) in taking, or refraining from
taking, any action thereunder or with respect to the Equipment Notes issued under such Indenture
that are held by the Subordination Agent as the property of the relevant Trust. Any Trustee acting
as Controlling Party will direct the Subordination Agent as such Trustee is directed by
Certificateholders evidencing fractional undivided interests aggregating not less than a majority
in interest in the relevant Trust. (Intercreditor Agreement, Sections 2.06 and 8.01(b))
Notwithstanding the foregoing, without the consent of each Liquidity Provider and each
Certificateholder holding Certificates representing a fractional undivided interest in the
Equipment Notes under the applicable Indenture held by the Subordination Agent, among other things,
no amendment, supplement, modification, consent or waiver of or relating to such Indenture, any
related Equipment Note, Participation Agreement or other related document will: (i) reduce the
principal amount of, Make-Whole Amount, if any, or interest on, any Equipment Note under such
Indenture; (ii) change the date on which any principal amount of, Make-Whole Amount, if any, or
interest on any Equipment Note under such Indenture, is due or payable; (iii) create any lien with
respect to the Collateral subject to such Indenture prior to or pari passu with the lien thereon
under such Indenture except such as are permitted by such Indenture; or (iv) reduce the percentage
of the outstanding principal amount of the Equipment Notes under such Indenture the consent of
whose holders is required for any supplemental agreement, or the consent of whose holders is
required for any waiver of compliance with certain provisions of such Indenture or of certain
defaults thereunder or their consequences provided for in such Indenture. In addition, without the
consent of each Certificateholder, no such amendment, modification, consent or waiver will, among
other things, deprive any Certificateholder of the benefit of the lien of any Indenture on the
related Collateral, except as provided in connection with the exercise of remedies under such
Indenture. (Intercreditor Agreement, Section 8.01(b)) See Indenture Events of Default and
Certain Rights Upon an Indenture Event of Default for a description of the rights of the
Certificateholders of each Trust to direct the respective Trustees.
Obligation to Purchase Equipment Notes
The Trustees will be obligated to purchase the Equipment Notes issued with respect to each
Aircraft prior to the Delivery Period Termination Date on and subject to the terms and conditions
of an amended and restated note purchase agreement (the Note Purchase Agreement) to be entered
into on the Class B Issuance Date among Delta, the Trustees, the Subordination Agent, the Escrow
Agent and the Paying Agent and the forms of financing agreements attached to the Note Purchase
Agreement. On and subject to the terms and conditions of the Note Purchase Agreement and the forms
of financing agreements attached to the Note Purchase Agreement, Delta agrees to enter into a
secured debt financing with respect to each Aircraft on or prior to October 14, 2011 with the
other relevant parties
pursuant to a Participation Agreement and an Indenture that are substantially in the forms
attached to the Note Purchase Agreement.
The description of such financing agreements in this prospectus supplement is based on the
forms of such agreements attached to the Note Purchase Agreement. However, the terms of the
financing agreements actually entered into with respect to an Aircraft may differ from the forms of
such agreements and, consequently, may differ from the description of such agreements contained in
this prospectus
S-49
supplement. See Description of the Equipment Notes. Although such changes are
permitted, under the Note Purchase Agreement, Delta must obtain written confirmation from each
Rating Agency to the effect that the use of financing agreements modified in any material respect
from the forms attached to the Note Purchase Agreement will not result in a withdrawal, suspension
or downgrading of the rating of each class of Certificates then rated by such Rating Agency. The
terms of such financing agreements also must comply with the Required Terms. In addition, Delta,
subject to certain exceptions, is obligated to certify to the Trustees that any substantive
modifications do not materially and adversely affect the Certificateholders or any Liquidity
Provider.
Under the Note Purchase Agreement, the Trustees will not be obligated to purchase the
Equipment Notes to be issued with respect to any Aircraft not yet financed if a Triggering Event
has occurred or certain specified conditions are not met. In addition, if a Delivery Period Event
of Loss (or an event that would constitute such a Delivery Period Event of Loss but for the
requirement that notice be given or time elapse or both) occurs with respect to an Aircraft before
such Aircraft is financed pursuant to this offering, the Trustees will not be obligated to purchase
the Equipment Notes to be issued with respect to such Aircraft. The Trustees will have no right or
obligation to purchase the Equipment Notes to be issued with respect to any Aircraft after the
Delivery Period Termination Date.
The Required Terms, as defined in the Note Purchase Agreement, mandate that:
|
|
|
the original principal amount and principal amortization schedule for each series of
Equipment Notes issued with respect to each Aircraft will be as set forth in the table for
that Aircraft included in Appendix V (each such principal amortization schedule to be
expressed in percentages of original principal amount); |
|
|
|
|
the interest rate applicable to each series of Equipment Notes must be equal to the
interest rate applicable to the Certificates issued by the corresponding Trust; |
|
|
|
|
the payment dates for the Equipment Notes must be April 15 and October 15; |
|
|
|
|
(a) the past due rate in the Indentures, (b) the Make-Whole Amount payable under the
Indentures, (c) the provisions relating to the redemption of the Equipment Notes in the
Indentures, and (d) the indemnification of the Loan Trustees, the Subordination Agent, the
Liquidity Providers, the Trustees and the Escrow Agent with respect to certain claims,
expenses and liabilities, in each case will be provided as set forth, as applicable, in
the form of Indenture attached as an exhibit to the Note Purchase Agreement (the
Indenture Form) or the form of Participation Agreement attached as an exhibit to the
Note Purchase Agreement (the Participation Agreement Form); |
|
|
|
|
the amounts payable under the all-risk aircraft hull insurance maintained with respect
to each Aircraft must be not less than 110% of the unpaid principal amount of the related
Equipment Notes, subject to certain rights of self-insurance; |
|
|
|
|
modifications in any material adverse respect are prohibited with respect to (i) the
Granting Clause of the Indenture Form so as to deprive holders of Equipments Notes under
all of the Indentures of a first priority security interest in and mortgage lien on the
Aircraft or, to the extent assigned,
certain of Deltas warranty rights under certain of its purchase agreements with the
aircraft manufacturer or to eliminate the obligations intended to be secured thereby, (ii)
certain provisions relating to the issuance, redemption, payments, and ranking of the
Equipment Notes (including the obligation to pay the Make-Whole Amount in certain
circumstances), (iii) certain provisions regarding Indenture Events of Default and remedies
relating thereto, (iv) certain provisions relating to the replacement of the airframe or
engines with respect to an Aircraft following an Event of Loss with respect to such
Aircraft, (v) certain provisions relating to claims, actions, third party beneficiaries,
voting, Section 1110 and Aircraft re-registration, (vi) the definition of
Make-Whole Amount
and (vii) the provision that New York law will govern the Indentures; and |
S-50
|
|
|
modifications in any material adverse respect are prohibited with respect to (i)
certain conditions to the obligations of the Trustees to purchase the Equipment Notes
issued with respect to an Aircraft involving good title to such Aircraft, obtaining a
certificate of airworthiness with respect to such Aircraft, entitlement to the benefits of
Section 1110 with respect to such Aircraft and filings of certain documents with the FAA,
(ii) the provisions restricting transfers of Equipment Notes, (iii) certain provisions
relating to UCC filings, representations and warranties, taxes, filings or third party
beneficiaries, (iv) certain provisions requiring the delivery of legal opinions and (v)
the provision that New York law will govern the Participation Agreements. |
Notwithstanding the foregoing, the Indenture Form or the Participation Agreement Form may be
modified to the extent required for the successive redemption of the Series B Equipment Notes and
issuance of Refinancing Equipment Notes or the issuance of pass through certificates by any pass
through trust that acquires such Refinancing Equipment Notes, or to provide for any credit support
for any pass through certificates relating to such Refinancing Equipment Notes, in each case as
provided in the Note Purchase Agreement.
Termination of the Trusts
With respect to each Trust, the obligations of Delta and the Trustee of such Trust will
terminate upon the distribution to the Certificateholders of such Trust and to such Trustee of all
amounts required to be distributed to them pursuant to the applicable Pass Through Trust Agreement
and the disposition of all property held in such Trust. The applicable Trustee will mail to each
Certificateholder of such Trust, not earlier than 60 days and not later than 15 days preceding such
final distribution, notice of the termination of such Trust, the amount of the proposed final
payment, the proposed date for the distribution of such final payment for such Trust and certain
other information. The Final Distribution to any Certificateholder of such Trust will be made only
upon surrender of such Certificateholders Certificates at the office or agency of the applicable
Trustee specified in such notice of termination. (Basic Agreement, Section 11.01)
In the event that all of the Certificateholders of such Trust do not surrender their
Certificates issued by such Trust for cancellation within six months after the date specified in
such written notice, the Trustee of such Trust will give a second written notice to the remaining
Certificateholders of such Trust to surrender such Certificates for cancellation and receive the
final distribution. No additional interest will accrue with respect to such Certificates after the
Distribution Date specified in the first written notice. In the event that any money held by the
Trustee of such Trust for the payment of distributions on the Certificates issued by such Trust
remains unclaimed for two years (or such lesser time as such Trustee shall be satisfied, after
sixty days notice from Delta, is one month prior to the escheat period provided under applicable
law) after the final distribution date with respect thereto, such Trustee will pay to each Loan
Trustee the appropriate amount of money relating to such Loan Trustee for distribution as provided
in the applicable Indenture, Participation Agreement or certain related documents and will give
written notice thereof to Delta. (Basic Agreement, Section 11.01)
The Trustees
The Class A Trustee is, and the Class B Trustee initially will be, U.S. Bank Trust National
Association. Each Trustees address is U.S. Bank Trust National Association, 300 Delaware Avenue,
9th Floor, Mail
Code EX-DE-WDAW, Wilmington, Delaware 19801, Attention: Corporate Trust Services (Reference:
Delta 2011-1 EETC).
With certain exceptions, the Trustees make no representations as to the validity or
sufficiency of the Basic Agreement, the Trust Supplements, the Certificates, the Equipment Notes,
the Indentures, the Intercreditor Agreement, the Participation Agreements, any Liquidity Facility,
the Note Purchase Agreement, the Deposit Agreements, the Escrow Agreements or other related
documents. (Basic Agreement, Sections 7.04 and 7.15; Trust Supplements, Sections 7.03(a) and 7.04)
The Trustee of any Trust will not be liable to the Certificateholders of such Trust for any action
taken or omitted to be taken by it in good faith in accordance with the direction of the holders of
a majority in face amount of outstanding
S-51
Certificates of such Trust. (Basic Agreement, Section
7.03(h)) Subject to certain provisions, no Trustee will be under any obligation to exercise any of
its rights or powers under any Pass Through Trust Agreement at the request of any holders of
Certificates issued thereunder unless there has been offered to such Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred by such Trustee in
exercising such rights or powers. (Basic Agreement, Section 7.03(e)) Each Pass Through Trust
Agreement provides that the applicable Trustee (and any related agent or affiliate in their
respective individual or any other capacity) may acquire and hold Certificates issued thereunder
and, subject to certain conditions, may otherwise deal with Delta with the same rights it would
have if it were not such Trustee. (Basic Agreement, Section 7.05)
Book-Entry Registration; Delivery and Form
General
On the Class B Issuance Date, the Class A Certificates are, and the Class B Certificates will
be, represented by one or more fully registered global Certificates (each, a Global Certificate)
of the applicable class and are or will be, as the case may be, deposited with the related Trustee
as custodian for DTC and registered in the name of Cede, as nominee of DTC. Except in the limited
circumstances described below, owners of beneficial interests in Global Certificates will not be
entitled to receive physical delivery of Definitive Certificates. The Certificates are not issued
or will not be issuable in bearer form.
DTC
DTC has informed Delta as follows: DTC is a limited purpose trust company organized under the
laws of the State of New York, a banking organization within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the
Uniform Commercial Code and a Clearing Agency registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants (DTC
Participants) and facilitate the clearance and settlement of securities transactions between DTC
Participants through electronic book-entry changes in accounts of DTC Participants, thereby
eliminating the need for physical movement of certificates. DTC Participants include securities
brokers and dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly (Indirect Participants).
Delta expects that, pursuant to procedures established by DTC, (i) upon the issuance of the
Global Certificates, DTC or its custodian will credit, on its internal system, the respective
principal amount of the individual beneficial interests represented by such Global Certificates to
the accounts of persons who have accounts with such depositary and (ii) ownership of beneficial
interests in the Global Certificates will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect to interests of DTC
Participants) and the records of DTC Participants (with respect to interests of persons other than
DTC Participants). Such accounts initially will be designated by or on behalf of the underwriter.
Ownership of beneficial interests in the Global Certificates will be limited to DTC Participants or
persons who hold interests through DTC Participants. The laws of some states require
that certain purchasers of securities take physical delivery of such securities. Such limits
and such laws may limit the market for beneficial interests in the Global Certificates. QIBs may
hold their interests in the Global Certificates directly through DTC if they are DTC Participants,
or indirectly through organizations that are DTC Participants.
So long as DTC or its nominee is the registered owner or holder of the Global Certificates,
DTC or such nominee, as the case may be, will be considered the sole record owner or holder of the
Certificates represented by such Global Certificates for all purposes under the Certificates and
the Pass Through Trust Agreements. All references in this prospectus supplement to actions by the
Certificateholders shall refer to actions taken by DTC upon instructions from DTC Participants, and
all references to distributions, notices, reports and statements to the Certificateholders will
refer, as the case may be, to distributions, notices, reports and statements to DTC or such
nominee, as the registered holder of the Certificates. No beneficial
S-52
owners of an interest in the
Global Certificates will be able to transfer that interest except in accordance with DTCs
applicable procedures, in addition to those provided or under the applicable Pass Through Trust
Agreement. Such beneficial owners of an interest in the Global Certificates, and registered owners
of a Definitive Certificate, are referred to herein individually as a Certificate Owner and
collectively as the Certificate Owners. DTC has advised Delta that it will take any action
permitted to be taken by a Certificateholder under the applicable Pass Through Trust Agreement only
at the direction of one or more DTC Participants to whose accounts with DTC the Global Certificates
are credited. Additionally, DTC has advised Delta that in the event any action requires approval by
a certain percentage of the Certificateholders of a particular class, DTC will take such action
only at the direction of and on behalf of DTC Participants whose holders include undivided
interests that satisfy any such percentage. DTC may take conflicting actions with respect to other
undivided interests to the extent that such actions are taken on behalf of DTC Participants whose
holders include such undivided interests.
Under the rules, regulations and procedures creating and affecting DTC and its operations (the
DTC Rules), DTC is required to make book-entry transfers of Certificates among DTC Participants
on whose behalf it acts with respect to such Certificates. Certificate Owners of such Certificates
that are not DTC Participants but that desire to purchase, sell or otherwise transfer ownership of,
or other interests in, such Certificates may do so only through DTC Participants. DTC Participants
and Indirect Participants with which Certificate Owners have accounts with respect to such
Certificates, however, are required to make book-entry transfers on behalf of their respective
customers. In addition, under the DTC Rules, DTC is required to receive and transmit to the DTC
Participants distributions of principal of, Make-Whole Amount, if any, and interest with respect to
the Certificates. Such Certificate Owners thus will receive all distributions of principal,
Make-Whole Amount, if any, and interest from the relevant Trustee through DTC Participants or
Indirect Participants, as the case may be. Under this book entry system, such Certificate Owners
may experience some delay in their receipt of payments because such payments will be forwarded by
the relevant Trustee to Cede, as nominee for DTC, and DTC in turn will forward the payments to the
appropriate DTC Participants in amounts proportionate to the principal amount of such DTC
Participants respective holdings of beneficial interests in the relevant Certificates, as shown on
the records of DTC or its nominee. Distributions by DTC Participants to Indirect Participants or
Certificate Owners, as the case may be, will be the responsibility of such DTC Participants.
Unless and until Definitive Certificates are issued under the limited circumstances described
herein, the only Certificateholder under each Pass Through Trust Agreement will be Cede, as
nominee of DTC. Certificate Owners of Certificates therefore will not be recognized by the Trustees
as Certificateholders, as such term is used in the Pass Through Trust Agreements, and such
Certificate Owners will be permitted to exercise the rights of Certificateholders only indirectly
through DTC and DTC Participants. Conveyance of notices and other communications by DTC to DTC
Participants and by DTC Participants to Indirect Participants and to such Certificate Owners will
be governed by arrangements among them, subject to any statutory or regulatory requirements as may
be in effect from time to time.
Payments of the principal of, Make-Whole Amount (if any) and interest on the Global
Certificates will be made to DTC or its nominee, as the case may be, as the registered owner
thereof. Payments, transfers, exchanges and other matters relating to beneficial interests in a
Global Certificate may be subject to various
policies and procedures adopted by DTC from time to time. Because DTC can only act on behalf
of DTC Participants, who in turn act on behalf of Indirect Participants, the ability of a
Certificateholder to pledge its interest to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such interest, may be limited due to the lack of a
physical certificate for such interest.
Neither Delta nor the Trustees, nor any paying agent or registrar with respect to the
Certificates, will have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in the Global Certificates or for
maintaining, supervising or reviewing any records relating to such beneficial ownership interests
or for the performance by DTC, any DTC Participant or any Indirect Participant of their respective
obligations under the DTC Rules or any other statutory, regulatory, contractual or customary
procedures governing their obligations. (Trust Supplements, Section 4.03(f))
S-53
Delta expects that DTC or its nominee, upon receipt of any payment of principal, Make-Whole
Amount (if any) or interest in respect of the Global Certificates, will credit DTC Participants
accounts with payments in amounts proportionate to their respective beneficial ownership interests
in the face amount of such Global Certificates, as shown on the records of DTC or its nominee.
Delta also expects that payments by DTC Participants to owners of beneficial interests in such
Global Certificates held through such DTC Participants will be governed by the standing
instructions and customary practices of such DTC Participants. Such payments will be the
responsibility of such DTC Participants.
Although DTC is expected to follow the foregoing procedures in order to facilitate transfers
in a Global Certificate among participants of DTC, it is under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
Same-Day Settlement
As long as Certificates are registered in the name of DTC or its nominee, all payments made by
Delta to the Loan Trustee under any Indenture will be in immediately available funds. Such
payments, including the final distribution of principal with respect to the Certificates, will be
passed through to DTC in immediately available funds.
Any Certificates registered in the name of DTC or its nominee will trade in DTCs Same Day
Funds Settlement System until maturity, and secondary market trading activity in the Certificates
will therefore be required by DTC to settle in immediately available funds. No assurance can be
given as the effect, if any, of settlement in same day funds on trading activity in the
Certificates.
Definitive Certificates
Interests in Global Certificates will be exchangeable or transferable, as the case may be, for
certificates in definitive, physical registered form (Definitive Certificates) only if (i) DTC
advises the applicable Trustee in writing that DTC is no longer willing or able to discharge
properly its responsibilities as depositary with respect to such Certificates and a successor
depositary is not appointed by such Trustee within 90 days of such notice, (ii) Delta, at its
option, elects to terminate the book-entry system through DTC or (iii) after the occurrence of an
Indenture Event of Default, Certificateholders with fractional undivided interests aggregating not
less than a majority in interest in a Trust advise the applicable Trustee, Delta and DTC through
DTC Participants in writing that the continuation of a book-entry system through DTC (or a
successor thereto) is no longer in such Certificateholders best interest. Neither Delta nor any
Trustee will be liable if Delta or such Trustee is unable to locate a qualified successor clearing
system. (Trust Supplements, Section 4.03(b))
In connection with the occurrence of any event described in the immediately preceding
paragraph, the Global Certificates will be deemed surrendered, and the Trustees will execute,
authenticate and deliver to each Certificate Owner of such Global Certificates in exchange for such
Certificate Owners beneficial interest in such Global Certificates, an equal aggregate principal
amount of Definitive Certificates of
authorized denominations, in each case as such Certificate Owner and related aggregate
principal amount have been identified and otherwise set forth (together with such other information
as may be required for the registration of such Definitive Certificates) in registration
instructions that shall have been delivered by or on behalf of DTC to the applicable Trustee.
(Trust Supplements, Section 4.03(d)) Delta, the Trustees and each registrar and paying agent with
respect to the Certificates (i) shall not be liable for any delay in delivery of such registration
instructions, and (ii) may conclusively rely on, and shall be protected in relying on, such
registration instructions. (Trust Supplements, Section 4.03(f))
Distribution of principal, Make-Whole Amount (if any) and interest with respect to Definitive
Certificates will thereafter be made by the applicable Trustee directly in accordance with the
procedures set forth in the applicable Pass Through Trust Agreement, to holders in whose names the
Definitive Certificates were registered at the close of business on the applicable record date.
Such distributions will be made by check mailed to the address of such holder as it appears on the
register maintained by the applicable Trustee. The final payment on any such Definitive
Certificate, however, will be made only upon
S-54
presentation and surrender of the applicable
Definitive Certificate at the office or agency specified in the notice of final distribution to the
applicable Certificateholders.
Definitive Certificates issued in exchange for Global Certificates will be transferable and
exchangeable at the office of the applicable Trustee upon compliance with the requirements set
forth in the applicable Pass Through Trust Agreement, subject in the case of the Class B
Certificates to certain transfer restrictions. See Transfer Restrictions for Class B
Certificates. No service charge will be imposed for any registration of transfer or exchange, but
payment of a sum sufficient to cover any tax or other governmental charge will be required. The
Certificates are registered instruments, title to which passes upon registration of the transfer of
the books of the applicable Trustee in accordance with the terms of the applicable Pass Through
Trust Agreement. (Basic Agreement, Section 3.04, with respect to Class A Certificates, or Class B
Trust Supplement, Section 9.03, with respect to Class B Certificates)
Transfer Restrictions for Class B Certificates
The Class B Certificates will be subject to transfer restrictions. They may be sold or
otherwise transferred only to QIBs, for so long as they are outstanding, unless Delta and the Class
B Trustee determine otherwise consistent with applicable law. See also Certain ERISA
Considerations.
Each purchaser of Class B Certificates, by such purchase, will be deemed to:
1. Represent that it is purchasing such Class B Certificates for its own account or an account
with respect to which it exercises sole investment discretion and that it and any such account is a
QIB.
2. Agree that any sale or other transfer by it of any such Class B Certificates will only be
made to a QIB.
3. Agree that it will, and that it will inform each subsequent transferee that such transferee
will be required to, deliver to each person to whom it transfers such Class B Certificates notice
of these restrictions on transfer of such Class B Certificates.
4. Agree that no registration of the transfer of any such Class B Certificate will be made
unless the transferee completes and submits to the Class B Trustee the form included on the reverse
of such Class B Certificate in which it states that it is purchasing such Class B Certificate for
its account or an account with respect to which it exercises sole investment discretion and that it
and any such account is a QIB.
5. Understand that such Class B Certificates will bear a legend substantially to the following
effect:
THIS CERTIFICATE IS SUBJECT TO TRANSFER RESTRICTIONS. BY ITS ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT IT IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT OF 1933, AS AMENDED); (2)
AGREES THAT, FOR SO LONG AS THIS CERTIFICATE IS OUTSTANDING, IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS CERTIFICATE EXCEPT TO A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT OF 1933, AS AMENDED); AND (3) AGREES THAT IF IT SHOULD RESELL OR OTHERWISE
TRANSFER THIS CERTIFICATE IT WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
CERTIFICATE, THE TRANSFEREE MUST COMPLETE THE FORM ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT SUCH FORM TO THE TRUSTEE. TRUST SUPPLEMENT NO. 2011-1B TO THE PASS THROUGH
TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE REGISTRAR TO REFUSE TO REGISTER ANY TRANSFER OF
THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS. INVESTORS SHOULD BE AWARE THAT THEY
MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
S-55
6. Acknowledge that Delta, the Class B Trustee, the underwriter and others will rely on the
truth and accuracy of the foregoing acknowledgments, representations, warranties and agreements and
agrees that, if any of the acknowledgments, representations, warranties and agreements deemed to
have been made by its purchase of such Class B Certificates is no longer accurate, it shall
promptly notify Delta, the Class B Trustee and the underwriter. If it is acquiring any such Class B
Certificates as a fiduciary or agent of one or more investor accounts, it represents that it has
sole investment discretion with respect to each such investor account and that it has full power to
make the foregoing acknowledgments, representations and agreements on behalf of each such investor
account.
7. Acknowledge that the foregoing restrictions apply to holders of beneficial interests in
such Class B Certificates as well as to registered holders of such Class B Certificates.
8. Acknowledge that the Class B Trustee will not be required to accept for registration of
transfer any such Class B Certificate unless evidence satisfactory to Delta and the Class B Trustee
that the restrictions on transfer set forth herein have been complied with is submitted to them.
S-56
DESCRIPTION OF THE DEPOSIT AGREEMENTS
The following summary describes certain material terms of the Deposit Agreements, as well as
certain related provisions of the Escrow Agreements and the Note Purchase Agreement. The summary
does not purport to be complete and is qualified in its entirety by reference to all of the
provisions of the Deposit Agreements and the related provisions of the Escrow Agreements and the
Note Purchase Agreement. Copies of the Class A Deposit Agreement and the Class A Escrow Agreement
were filed as exhibits to Deltas Current Report on Form 8-K, dated April 5, 2011. Copies of the
Class B Deposit Agreement, the Class B Escrow Agreement and the Note Purchase Agreement will be
filed as exhibits to a Current Report on Form 8-K to be filed by Delta with the SEC.
General
Under the Class A Escrow Agreement, the Escrow Agent entered into a deposit agreement, dated
as of April 5, 2011, with the Depositary (the Class A Deposit Agreement). (Class A Escrow
Agreement, Section 1.02(a)) Under the Class B Escrow Agreement, the Escrow Agent will enter into a
separate deposit agreement with the Depositary (the Class B Deposit Agreement, and together with
the Class A Deposit Agreement, the Deposit Agreements). Pursuant to the Class A Deposit
Agreement, the Depositary established separate accounts into which the proceeds of the offering of
the Class A Certificates were deposited and as of the Class B Issuance Date such proceeds will
remain so deposited (each such deposit, a Class A Deposit) on behalf of the Escrow Agent. (Class
A Deposit Agreement, Section 2.1) Pursuant to the Class B Deposit Agreement, the Depositary will
establish separate accounts into which the proceeds of the offering of the Class B Certificates
will be deposited (each such deposit, a Class B Deposit, and together with each Class A Deposit,
each, a Deposit) on behalf of the Escrow Agent. (Class B Deposit Agreement, Section 2.1) For each
Trust, there will be a separate Deposit for each Aircraft that is to be financed in this offering.
Pursuant to the Deposit Agreements, except as described below under Other Withdrawals and
Return of Deposits, on each Regular Distribution Date, the Depositary under each Deposit Agreement
will pay to the Paying Agent on behalf of the Escrow Agent, for distribution to the applicable
Certificateholders, an amount equal to the interest accrued on the Deposits during the relevant
interest period at a rate per annum equal to the interest rate applicable to Certificates issued by
the applicable Trust. (Deposit Agreements, Section 2.2) The Deposits and interest paid thereon will
not be subject to the subordination provisions of the Intercreditor Agreement and will not be
available to pay any other amount in respect of the Certificates.
Withdrawal of Deposits to Purchase Equipment Notes
Upon the financing of an Aircraft under the related Indenture prior to the Delivery Period
Termination Date, the Trustee of each Trust will request the Escrow Agent relating to such Trust to
withdraw from the Deposits relating to such Trust funds sufficient to enable the Trustee of such
Trust to purchase the Equipment Notes of the series applicable to such Trust issued with respect to
such Aircraft. (Note Purchase Agreement, Sections 1(b) and 1(d); Escrow Agreements, Section
1.02(c)) Any portion of any Deposit so withdrawn that is not used to purchase such Equipment Notes
will be re-deposited by the Escrow Agent or by each Trustee on behalf of the Escrow Agent into a
new account with the Depositary (each such deposit, also a Deposit). (Deposit Agreements, Section
2.4; Escrow Agreements, Section 1.06) Except as described below under Other Withdrawals and
Return of Deposits, the Depositary will pay accrued but unpaid interest on all Deposits withdrawn
to purchase Equipment Notes on the next Regular Distribution Date to the Paying Agent, on behalf of
the applicable Escrow Agent, for distribution to the Certificateholders. (Deposit Agreements,
Sections 2.2 and 4; Escrow Agreements, Section 2.03(a))
Other Withdrawals and Return of Deposits
The Trustees obligations to purchase Equipment Notes to be issued with respect to each
Aircraft are subject to satisfaction of certain conditions at the time of the financing of such
Aircraft under the related Indenture, as set forth in the Note Purchase Agreement and the related
Participation Agreement. See Description of the Certificates Obligation to Purchase Equipment
Notes. Since the Aircraft are
expected to be subjected to the financing of this offering from time to time prior to the
Delivery Period
S-57
Termination Date, no assurance can be given that all such conditions will be
satisfied with respect to each Aircraft prior to the Delivery Period Termination Date. If any funds
remain as Deposits with respect to any Trust on the Delivery Period Termination Date, such
remaining funds will be withdrawn by the Escrow Agent and distributed by the Paying Agent, with
accrued and unpaid interest thereon, but without any premium, to the Certificateholders of such
Trust on a date no earlier than 15 days after the Paying Agent has received notice of the event
requiring such distribution. If the day scheduled for such withdrawal is within 10 days before or
after a Regular Distribution Date, the Escrow Agent will request that such withdrawal be made on
such Regular Distribution Date. Moreover, in certain circumstances, any funds held as Deposits will
be returned by the Depositary to the Paying Agent automatically on October 14, 2011 (the Outside
Termination Date), and the Paying Agent will distribute such funds to the applicable
Certificateholders as promptly as practicable thereafter. The obligation to purchase Equipment
Notes to be issued with respect to any Aircraft not yet financed pursuant to this offering will
terminate on the Delivery Period Termination Date. (Deposit Agreements, Section 2.3(b)(i) and 4;
Escrow Agreements, Sections 1.02(f) and 2.03(b); Note Purchase Agreement, Section 2)
If a Delivery Period Event of Loss (or an event that would constitute such a Delivery Period
Event of Loss but for the requirement that notice be given or time elapse or both) occurs with
respect to an Aircraft before it is financed pursuant to this offering, Delta will give notice of
such event to each Trustee and such Trustee will submit a withdrawal certificate to the applicable
Escrow Agent, and any funds in any Deposit with respect to such Aircraft will be withdrawn by the
Escrow Agent and distributed by the related Paying Agent, with accrued and unpaid interest thereon,
but without any premium, to the Certificateholders of the related Trust on a date not earlier than
15 days after such Paying Agent has received notice of the event requiring such distribution. (Note
Purchase Agreement, Section 1(k); Deposit Agreements, Section 2.3(b)(iii); Escrow Agreements,
Sections 2.03(b) and 2.07) Once Delta delivers a notice described in the preceding sentence, the
Trustees will have no obligation to purchase Equipment Notes with respect to such Aircraft. (Note
Purchase Agreement, Section 2(c))
Delivery Period Event of Loss means, with respect to an Aircraft that is subject to an
Existing Financing, one of several events of loss with respect to such Aircraft under the
applicable Existing Financing, which events of loss are substantially similar to the Events of Loss
with respect to an Aircraft under the Indentures (see Description of Equipment Notes Certain
Provisions of the Indentures Events of Loss), except for certain differences in the time
periods in which certain events could ripen into events of loss.
If a Triggering Event occurs prior to the Delivery Period Termination Date, any funds
remaining in Deposits will be withdrawn by the Escrow Agent for the applicable Trust and
distributed by the Paying Agent for such Trust, with accrued and unpaid interest thereon, but
without any premium, to the Certificateholders of such Trust on a date no earlier than 15 days
after the Paying Agent has received notice of such Triggering Event, but, if the day scheduled for
such withdrawal is within 10 days before or after a Regular Distribution Date, such Escrow Agent
will request such withdrawal be made on such Regular Distribution Date. (Escrow Agreements, Section
1.02(f)) The obligation to purchase Equipment Notes to be issued with respect to any Aircraft not
yet financed pursuant to this offering will terminate on the date such Triggering Event occurs.
(Note Purchase Agreement, Section 2)
Replacement of Depositary
If the Depositarys Short-Term Rating issued by either Rating Agency is downgraded below the
Depositary Threshold Rating, then Delta must, within 30 days of the occurrence of such event,
replace the Depositary with a new depositary bank meeting the requirements set forth below (the
Replacement Depositary). (Note Purchase Agreement, Section 5(a))
Depositary Threshold Rating means, for any entity, a Short-Term Rating for such entity of
P-1 from Moodys Investors Service, Inc. (Moodys) and A-1+ from Standard & Poors Ratings
Services, a Standard & Poors Financial Services LLC business
(Standard & Poors, and together with Moodys, the Rating Agencies). (Note Purchase
Agreement, Section 5(a))
S-58
Any Replacement Depositary may either be (a) one that meets the Depositary Threshold Rating or
(b) one that does not meet the Depositary Threshold Rating, so long as, in the case of either of
the immediately preceding clauses (a) and (b), Delta shall have received a written confirmation
from each Rating Agency to the effect that the replacement of the Depositary with the Replacement
Depositary will not result in a withdrawal, suspension or reduction of the ratings of each class of
Certificates rated by such Rating Agency below the then current rating for such Certificates
(before the downgrading of such rating as a result of the downgrading of the Depositary below the
applicable Depositary Threshold Rating). (Note Purchase Agreement, Section 5(c)(i))
At any time during the period prior to the Delivery Period Termination Date (including after
the occurrence of a downgrade event described above), Delta may replace the Depositary with a
Replacement Depositary. (Note Purchase Agreement, Section 5(a)) There can be no assurance that at
the time of a downgrade event described above, there will be an institution willing to replace the
downgraded Depositary or that each Rating Agency will provide the ratings confirmation described in
the immediately preceding paragraph.
Upon satisfaction of the conditions for replacement of the Depositary with a Replacement
Depositary set forth in the Note Purchase Agreement, the Escrow Agent for each Trust will request,
upon at least 5 Business Days notice, the following withdrawals:
|
|
|
with respect to all Deposits of such Trust then held by the Depositary being replaced,
withdrawal of (1) the entire amount of such Deposits together with (2) all accrued and
unpaid interest on such Deposits to but excluding the date of such withdrawal, which funds
will be paid by the Depositary being replaced over to such Replacement Depositary; and |
|
|
|
|
with respect to all Deposits of such Trust, if any, previously withdrawn in connection
with the purchase of the related Equipment Notes, as described in Withdrawal of
Deposits to Purchase Equipment Notes, withdrawal of all accrued and unpaid interest on
such Deposits to but excluding the date of the applicable withdrawal in connection with
the purchase of such Equipment Notes, which funds will be paid by the Depositary being
replaced to the Paying Agent Account of such Trust and, upon the confirmation by the
Paying Agent of receipt in such Paying Agent Account of such amounts, the Paying Agent
will distribute such amounts to the Certificateholders of such Trust on the immediately
succeeding Regular Distribution Date and, until such Regular Distribution Date, the
amounts will be held in such Paying Agent Account. (Note Purchase Agreement, Section 5(d);
Escrow Agreements, Sections 1.02(d) and 2.03(c)) |
Limitation on Damages
The Deposit Agreements provide that in no event shall the Depositary be responsible or liable
for special, indirect, punitive, or consequential loss or damage of any kind whatsoever (including,
but not limited to, loss of profit, whether or not foreseeable) suffered by the Escrow Agent of
each Trust or any of the Receiptholders in connection with the Deposit Agreements or the
transactions contemplated or any relationships established by the Deposit Agreements irrespective
of whether the Depositary has been advised of the likelihood of such loss or damage and regardless
of the form of action. (Deposit Agreements, Section 16)
Depositary
The Bank of New York Mellon (the Bank) will act as depositary (the Depositary) under the
Class B Deposit Agreement. The Bank is also the Depositary under the Class A Deposit Agreement. The
Bank is a New York state chartered bank that formerly was named The Bank of New York. The Bank
has total assets of approximately $236.330 billion and total equity capital of
approximately $17.089 billion, in each case at June 30, 2011. The Bank is a wholly-owned
subsidiary of The Bank of New York Mellon Corporation (the BNMC).
S-59
The Banks principal office is located at One Wall Street, New York, New York 10286, and its
telephone number is 212-495-1784. A copy of the most recent BNMC filings with the SEC, including
its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, may
be obtained from BNMCs Public Relations Department, One Wall Street, 31st Floor, (212) 635-1569 or
from the SEC at http://www.sec.gov. The information that BNMC and affiliates, including the Bank,
filed with the SEC is not part of, and is not incorporated by reference in, this prospectus
supplement.
S-60
DESCRIPTION OF THE ESCROW AGREEMENTS
The following summary describes certain material terms of an escrow and paying agent
agreement, dated as of April 5, 2011 (the Class A Escrow Agreement), with respect to the Class A
Certificates and the Class A Trust and the escrow and paying agent agreement to be entered into on
the Class B Issuance Date with the respect to the Class B Certificates and the Class B Trust (the
Class B Escrow Agreement and, together with the Class A Escrow Agreement, the Escrow
Agreements), as well as certain related provisions of the Deposit Agreements and the Note Purchase
Agreement. The summary does not purport to be complete and is qualified in its entirety by
reference to all of the provisions of the Escrow Agreements and the related provisions of the
Deposit Agreements. Copies of the Class A Escrow Agreement and the Class A Deposit Agreement were
filed as exhibits to Deltas Current Report on Form 8-K, dated April 5, 2011. Copies of the Class B
Escrow Agreement and the Class B Deposit Agreement will be filed as exhibits to a Current Report on
Form 8-K to be filed by Delta with the SEC.
General
U.S. Bank National Association, as escrow agent (the Escrow Agent), U.S. Bank Trust National
Association, as paying agent on behalf of the Escrow Agent (the Paying Agent), the Class A
Trustee and the underwriters for the Class A Certificates entered into the Class A Escrow Agreement
for the benefit of the Class A Certificateholders as holders of the Escrow Receipts affixed thereto
(in such capacity, the Class A Receiptholders). The cash proceeds of the offering of the Class A
Certificates were deposited on behalf of the Escrow Agent (for the benefit of the Class A
Receiptholders) with the Depositary as Class A Deposits. (Class A Escrow Agreement, Section 1.03;
Class A Deposit Agreement, Section 2.1) The Escrow Agent, the Paying Agent, the Class B Trustee and
the underwriter for the Class B Certificates will enter into the Class B Escrow Agreement for the
benefit of the Class B Certificateholders as holders of the Escrow Receipts affixed thereto (in
such capacity, the Class B Receiptholders, and together with the Class A Receiptholders, the
Receiptholders). The cash proceeds of the offering of the Class B Certificates will be deposited
on behalf of the Escrow Agent (for the benefit of the Class B Receiptholders) with the Depositary
as Class B Deposits. (Class B Escrow Agreement, Section 1.03; Class B Deposit Agreement, Section
2.1) The Escrow Agent will permit the Trustee of the related Trust to cause funds to be withdrawn
from the related Deposits to allow such Trustee to purchase the related Equipment Notes pursuant to
the Note Purchase Agreement and the related Participation Agreement or in connection with special
distributions under certain circumstances as described under Description of the Deposit Agreements
Other Withdrawals and Return of Deposits. (Escrow
Agreements, Section 1.02(c) (f)) In
addition, pursuant to the terms of the Deposit Agreements, the Depositary agrees to pay interest on
the Deposits accrued in accordance with the Deposit Agreements to the Paying Agent for distribution
to the Receiptholders. (Deposit Agreements, Section 4)
Each Escrow Agreement requires that the Paying Agent establish and maintain, for the benefit
of the Receiptholders of each Trust, the Paying Agent Account for such Trust, which will be
non-interest-bearing, and the Paying Agent is under no obligation to invest any amounts held in
such Paying Agent Account. (Escrow Agreements, Section 2.02). Pursuant to the Deposit Agreements,
the Depositary agrees to pay funds released from the related Deposits and accrued interest on the
related Deposits directly into such Paying Agent Account, except for amounts withdrawn to purchase
any related Equipment Notes as described under Description of the Deposit Agreements Withdrawal
of Deposits to Purchase Equipment Notes and amounts paid to a Replacement Depositary as described
under Description of the Deposit Agreements Replacement of Depositary. (Deposit Agreements,
Section 4) The Paying Agent will distribute amounts deposited into the Paying Agent Account for the
related Trust to the Certificateholders of such Trust as further described herein. See Description
of the Certificates Payments and Distributions and Description of the Deposit Agreements.
Upon receipt by the Depositary of the cash proceeds from the offering of Certificates, the
Escrow Agent issued, or in the case of the Class B Certificates, will issue, one or more escrow
receipts (Escrow Receipts) in respect of each class of Certificates which was, or will be, as
applicable, affixed by the related Trustee to each Certificate of the applicable class. Each
Escrow Receipt evidences the related Receiptholders interest in amounts from time to time
deposited into the Paying Agent Account and is
S-61
limited in recourse to amounts deposited into such
account. An Escrow Receipt may not be assigned or transferred except in connection with the
assignment or transfer of the Certificate to which it is affixed. Each Escrow Receipt will be
registered by the Escrow Agent in the same name and manner as the Certificate to which it is
affixed. (Escrow Agreements, Sections 1.03 and 1.04) Because the Escrow Receipts will be affixed to
the Certificates, distributions to the Receiptholders on the Escrow Receipts are sometimes referred
to in this prospectus supplement, for convenience, as distributions to the Certificateholders.
Each Escrow Agreement provides that each Receiptholder will have the right (individually and
without the need for any other action of any person, including the Escrow Agent or any other
Receiptholder), upon any default in the payment of interest on the Deposits when due by the
Depositary in accordance with the applicable Deposit Agreement, or upon any default in the payment
of any final withdrawal, replacement withdrawal or event of loss withdrawal when due by the
Depositary in accordance with the terms of the applicable Deposit Agreement and Escrow Agreement,
to proceed directly against the Depositary by making a demand to the Depositary for the portion of
such payment that would have been distributed to such Receiptholder pursuant to such Escrow
Agreement or by bringing suit to enforce payment of such portion. The Escrow Agent will notify
Receiptholders in the event of a default in any such payment and will promptly forward to
Receiptholders upon receipt copies of all written communications relating to any payments due to
the Receiptholders in respect of the Deposits. (Escrow Agreements, Sections 9 and 16)
Certain Modifications of the Escrow Agreements and Note Purchase Agreement
The Note Purchase Agreement contains provisions requiring the Trustees, the Escrow Agent and
the Paying Agent, at Deltas request, to enter into amendments to, among other agreements, the
Escrow Agreements and the Note Purchase Agreement as may be necessary or desirable:
|
|
|
to give effect to any redemption of Series B Equipment Notes and issuance of any
Refinancing Equipment Notes and the issuance of Refinancing Certificates and to make
related changes (including to provide for any prefunding mechanism) and to provide for
credit support (including a liquidity facility) with respect thereto; and |
|
|
|
|
if the Depositary is to be replaced, to give effect to the replacement of the
Depositary with the Replacement Depositary and the replacement of the Deposit Agreements
with replacement deposit agreements. (Note Purchase Agreement, Sections 4(a)(v) and 5(e)) |
In each case described immediately above, no requests (other than Deltas request) or consents
(including no consent of the Certificateholders) will be required for such amendments.
Each Escrow Agreement contains provisions requiring the Escrow Agent and the Paying Agent,
upon request of the related Trustee and without any consent of the Certificateholders, to enter
into an amendment to the Escrow Agreements or the Note Purchase Agreement, among other things, for
the following purposes:
|
|
|
to correct or supplement any provision in the Escrow Agreements or the Note Purchase
Agreement which may be defective or inconsistent with any other provision in the Escrow
Agreements or the Note Purchase Agreement or to cure any ambiguity or correct any mistake; |
|
|
|
|
to modify any other provision with respect to matters or questions arising under the
Escrow Agreements or the Note Purchase Agreement; provided that any such action will not
materially adversely affect the Certificateholders; |
|
|
|
|
to comply with any requirement of the SEC, applicable law, rules or regulations of any
exchange or quotation system on which the Certificates are listed or any regulatory body; |
S-62
|
|
|
to evidence and provide for the acceptance of appointment under the Escrow Agreements
or the Note Purchase Agreement of a successor Escrow Agent, successor Paying Agent or
successor Trustee; or |
|
|
|
|
for any purposes described in the first thirteen bullet points of the first paragraph
under Description of the Certificates Modification of the Pass Through Trust
Agreements and Certain Other Agreements. (Escrow Agreements, Section 8) |
The Escrow Agent
U.S. Bank National Association will be the Escrow Agent under the Class B Escrow Agreement.
U.S. Bank National Association is also the Escrow Agent under the Class A Escrow Agreement. The
Escrow Agents address is U.S. Bank National Association, One Federal Street, 3rd Floor,
Mail Code EX-MA-FED, Boston, Massachusetts 02110, Attention: Corporate Trust Services.
The Paying Agent
U.S. Bank Trust National Association will be the Paying Agent under the Class B Escrow
Agreement. U.S. Bank Trust National Association is also the Paying Agent under the Class A Escrow
Agreement. The Paying Agents address is U.S. Bank Trust National Association, One Federal Street,
3rd Floor, Mail Code EX-MA-FED, Boston, Massachusetts 02110, Attention: Corporate Trust
Services.
S-63
DESCRIPTION OF THE LIQUIDITY FACILITIES
The following summary describes certain material terms of the Liquidity Facilities and certain
provisions of the Intercreditor Agreement relating to the Liquidity Facilities. The summary does
not purport to be complete and is qualified in its entirety by reference to all of the provisions
of the Liquidity Facilities and the Intercreditor Agreement. A copy of the Class A Liquidity
Facility was filed as an exhibit to Deltas Current Report on Form 8-K, dated April 5, 2011 and
copies of the Class B Liquidity Facility and the Intercreditor Agreement will be filed as an
exhibit to a Current Report on Form 8-K to be filed by Delta with the SEC.
General
The liquidity provider for the Class A Trust (the Class A Liquidity Provider) entered into a
revolving credit agreement, dated as of April 5, 2011 (the Class A Liquidity Facility), with the
Subordination Agent with respect to the Class A Trust. The liquidity provider for the Class B Trust
(the Class B Liquidity Provider and, together with the Class A Liquidity Provider, the Liquidity
Providers and, each a Liquidity Provider) will enter into a separate revolving credit agreement
(the Class B Liquidity Facility and, together with the Class A Liquidity Facility, the Liquidity
Facilities and, each, a Liquidity Facility) with the Subordination Agent with respect to the
Class B Trust. Under each Liquidity Facility, the related Liquidity Provider will be required, if
necessary, to make one or more advances (Interest Drawings) to the Subordination Agent in an
aggregate amount (the Required Amount) sufficient to pay interest on the Pool Balance of the
related class of Certificates on up to three successive semiannual Regular Distribution Dates
(without regard to any expected future payments of principal on such Certificates) at the Stated
Interest Rate for such Certificates. If interest payment defaults occur which exceed the amount
covered by and available under the Liquidity Facility for the Class A Trust or the Class B Trust,
the Certificateholders of such Trust will bear their allocable share of the deficiencies to the
extent that there are no other sources of funds. The initial Liquidity Provider with respect to
each of the Class A Trust and the Class B Trust may be replaced by one or more other entities with
respect to either of such Trusts under certain circumstances. Therefore, the Liquidity Provider for
each Trust may differ.
Drawings
The aggregate amount available under the Liquidity Facility for each applicable Trust at
October 15, 2011 (the first Regular Distribution Date that
occurs after the Class B Issuance
Date), assuming that all Aircraft have been financed, will be:
|
|
|
|
|
|
|
Available |
Trust |
|
Amount |
|
|
|
|
|
Class A |
|
$ |
23,704,618.06 |
|
Class B |
|
$ |
10,901,250.00 |
|
Except as otherwise provided below, the Liquidity Facility for each Trust will enable the
Subordination Agent to make Interest Drawings thereunder on any Regular Distribution Date in order
to make interest distributions then scheduled for the Certificates of such Trust at the Stated
Interest Rate for the Certificates of such Trust to the extent that the amount, if any, available
to the Subordination Agent on such Regular Distribution Date is not sufficient to pay such
interest. The maximum amount available to be drawn under the Liquidity Facility with respect to any
Trust on any Regular Distribution Date to fund any shortfall of interest on Certificates of such
Trust will not exceed the then Maximum Available Commitment under such Liquidity Facility. The
Maximum Available Commitment at any time under each Liquidity Facility is an amount equal to the
then Maximum Commitment of such Liquidity Facility less the aggregate amount of each Interest
Drawing outstanding under such Liquidity Facility at such time; provided that, following a
Downgrade Drawing, a Special
Termination Drawing, a Final Drawing or a Non-Extension Drawing under such Liquidity Facility,
the Maximum Available Commitment under such Liquidity Facility shall be zero.
S-64
Maximum Commitment for the Liquidity Facility for the Class A Trust and the Class B Trust,
initially, means $23,704,618.06, and
$10,901,250.00, respectively, in each case as the
same may be reduced from time to time as described below.
The Liquidity Facility for any applicable class of Certificates does not provide for drawings
thereunder to pay for principal of, or Make-Whole Amount on, the Certificates of such class or any
interest with respect to the Certificates of such class in excess of the Stated Interest Rate for
such Certificates or for more than three semiannual installments of interest or to pay principal
of, or interest on, or Make-Whole Amount with respect to, the Certificates of any other class.
(Liquidity Facilities, Section 2.02; Intercreditor Agreement, Section 3.05) In addition, the
Liquidity Facility with respect to each Trust does not provide for drawings thereunder to pay any
amounts payable with respect to the Deposits relating to such Trust.
Each payment by a Liquidity Provider for a Trust will reduce by the same amount the Maximum
Available Commitment under the related Liquidity Facility, subject to reinstatement as hereinafter
described. With respect to any Interest Drawings, upon reimbursement of the applicable Liquidity
Provider in full or in part for the amount of such Interest Drawings plus accrued interest thereon,
the Maximum Available Commitment under the applicable Liquidity Facility will be reinstated by the
amount reimbursed but not to exceed the then Required Amount of the applicable Liquidity Facility;
provided, however, that the Maximum Available Commitment of such Liquidity Facility will not be so
reinstated at any time if (i) a Liquidity Event of Default has occurred and is continuing and less
than 65% of the then aggregate outstanding principal amount of all Equipment Notes are Performing
Equipment Notes or (ii) a Final Drawing, Downgrade Drawing, Special Termination Drawing or
Non-Extension Drawing shall have occurred with respect to such Liquidity Facility. With respect to
any other drawings under such Liquidity Facility, amounts available to be drawn thereunder are not
subject to reinstatement. (Liquidity Facilities, Section 2.02(a); Intercreditor Agreement, Section
3.05(g)) On each date on which the Pool Balance for a Trust shall have been reduced, the Maximum
Commitment of the Liquidity Facility for such Trust will be automatically reduced to an amount
equal to the then Required Amount. (Liquidity Facilities, Section 2.04; Intercreditor Agreement,
Section 3.05(j))
Performing Equipment Note means an Equipment Note issued pursuant to an Indenture with
respect to which no payment default has occurred and is continuing (without giving effect to any
acceleration); provided that, in the event of a bankruptcy proceeding in which Delta is a debtor
under the Bankruptcy Code, (i) any payment default occurring before the date of the order for
relief in such proceedings shall not be taken into consideration during the 60-day period under
Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period as may apply under Section
1110(b) of the Bankruptcy Code) (the Section 1110 Period), (ii) any payment default occurring
after the date of the order for relief in such proceeding will not be taken into consideration if
such payment default is cured under Section 1110(a)(2)(B) of the Bankruptcy Code before the later
of 30 days after the date of such default or the expiration of the Section 1110 Period and (iii)
any payment default occurring after the Section 1110 Period will not be taken into consideration if
such payment default is cured before the end of the grace period, if any, set forth in the related
Indenture. (Intercreditor Agreement, Section 1.01)
Replacement of Liquidity Facilities
If at any time the Short-Term Rating of a Liquidity Provider issued by either Rating Agency
(or, if such Liquidity Provider does not have a Short-Term Rating issued by a given Rating Agency,
the Long-Term Rating of such Liquidity Provider issued by such Rating Agency) is lower than the
Liquidity Threshold Rating, then the related Liquidity Facility may be replaced with a Replacement
Facility. If such Liquidity Facility is not so replaced with a Replacement Facility within 10 days
after the downgrading, the Subordination Agent will draw the then Maximum Available Commitment
under such Liquidity Facility (the Downgrade Drawing). The Subordination Agent will deposit the
proceeds of any Downgrade Drawing into a cash collateral account (the Cash Collateral Account)
for the applicable class of Certificates and will use these proceeds for the same purposes and
under the same circumstances, and subject to the same conditions, as cash payments of Interest
Drawings under such Liquidity Facility would be used. (Liquidity Facilities, Section 2.02(b)(ii);
Intercreditor Agreement, Sections 3.05(c) and (f))
S-65
Long-Term Rating means, for any entity: (a) in the case of Moodys, the long-term senior
unsecured debt rating of such entity and (b) in the case of Standard & Poors, the long-term issuer
credit rating of such entity. (Intercreditor Agreement, Section 1.01)
Short-Term Rating means, for any entity: (a) in the case of Moodys, the short-term senior
unsecured debt rating of such entity and (b) in the case of Standard & Poors, the short-term
issuer credit rating of such entity. (Intercreditor Agreement, Section 1.01)
Liquidity Threshold Rating means: (i) a Short-Term Rating of P-1 in the case of Moodys and
A-1 in the case of Standard & Poors and (ii) in the case of any entity that does not have a
Short-Term Rating from either or both of such Rating Agencies, then in lieu of such Short-Term
Rating from such Rating Agency or Rating Agencies, a Long-Term Rating of A2 in the case of Moodys
and A in the case of Standard & Poors. (Intercreditor Agreement, Section 1.01)
A Replacement Facility for any Liquidity Facility will mean an irrevocable revolving credit
agreement (or agreements) in substantially the form of the replaced Liquidity Facility, including
reinstatement provisions, or in such other form (which may include a letter of credit, surety bond,
financial insurance policy or guaranty) as will permit the Rating Agencies to confirm in writing
their respective ratings then in effect for the Certificates with respect to which such Liquidity
Facility was issued (before downgrading of such ratings, if any, as a result of the downgrading of
the related Liquidity Provider), in a face amount (or in an aggregate face amount) equal to the
amount sufficient to pay interest on the Pool Balance of the Certificates of the applicable Trust
(at the Stated Interest Rate for such Certificates, and without regard to expected future principal
distributions) on the three successive semiannual Regular Distribution Dates following the date of
replacement of such Liquidity Facility and issued by an entity (or entities) having Short-Term
Ratings issued by the Rating Agencies (or if such entity does not have a Short-Term Rating issued
by a given Rating Agency, the Long-Term Rating of such entity issued by such Rating Agency) which
are equal to or higher than the applicable Liquidity Threshold Rating. (Intercreditor Agreement,
Section 1.01) The provider of any Replacement Facility will have the same rights (including,
without limitation, priority distribution rights and rights as Controlling Party) under the
Intercreditor Agreement as the replaced Liquidity Provider. (Intercreditor Agreement, Section 3.05)
The Liquidity Facility for each of the Class A Trust and the Class B Trust provides that the
applicable Liquidity Providers obligations thereunder will expire on the earliest of:
|
|
|
April 4, 2012; |
|
|
|
|
the date on which the Subordination Agent delivers to such Liquidity Provider a
certification that all of the Certificates of such Trust have been paid in full or
provision has been made for such payment; |
|
|
|
|
the date on which the Subordination Agent delivers to such Liquidity Provider a
certification that a Replacement Facility has been substituted for such Liquidity
Facility; |
|
|
|
|
the fifth Business Day following receipt by the Subordination Agent of a Termination
Notice from such Liquidity Provider (see Liquidity Events of Default); and |
|
|
|
|
the date on which no amount is or may (including by reason of reinstatement) become
available for drawing under such Liquidity Facility. (Liquidity Facilities, Section 1.01) |
Each Liquidity Facility provides that it may be extended for additional 364-day periods by
mutual agreement of the related Liquidity Provider and the Subordination Agent. The Intercreditor
Agreement will provide for the replacement of the Liquidity Facility for any Trust if such
Liquidity Facility is scheduled to expire earlier than 15 days after the Final Legal Distribution
Date for the Certificates of such Trust and such Liquidity Facility is not extended or replaced by
the 25th day prior to its then scheduled expiration date. (Liquidity Facilities, Section 2.10) If
such Liquidity Facility is not so extended or replaced by the 25th
S-66
day prior to its then scheduled
expiration date, the Subordination Agent shall request a drawing in full up to the then Maximum
Available Commitment under such Liquidity Facility (the Non-Extension Drawing). (Liquidity
Facilities, Section 2.02(b)(i)) The Subordination Agent will deposit the proceeds of the
Non-Extension Drawing into the Cash Collateral Account for the related Certificates and will use
these proceeds for the same purposes and under the same circumstances, and subject to the same
conditions, as cash payments of Interest Drawings under such Liquidity Facility would be used.
(Intercreditor Agreement, Section 3.05(d))
Subject to certain limitations, Delta may, at its option, arrange for a Replacement Facility
at any time to replace the Liquidity Facility for any Trust (including without limitation any
Replacement Facility described in the following sentence); provided that, if the initial Liquidity
Provider is replaced, it shall be replaced with respect to all Liquidity Facilities under which it
is the Liquidity Provider. (Intercreditor Agreement, Section 3.05(e)) In addition, if a Liquidity
Provider shall determine not to extend a Liquidity Facility, then such Liquidity Provider may, at
its option, arrange for a Replacement Facility to replace such Liquidity Facility (i) during the
period no earlier than 40 days and no later than 25 days prior to the then scheduled expiration
date of such Liquidity Facility and (ii) at any time after a Non-Extension Drawing has been made
under such Liquidity Facility. (Liquidity Facilities, Section 2.10) A Liquidity Provider may also
arrange for a Replacement Facility to replace the related Liquidity Facility at any time after a
Downgrade Drawing under such Liquidity Facility. If any Replacement Facility is provided at any
time after a Downgrade Drawing or a Non-Extension Drawing under any Liquidity Facility, the funds
with respect to such Liquidity Facility on deposit in the Cash Collateral Account for such Trust
will be returned to the Liquidity Provider being replaced. (Intercreditor Agreement, Section
3.05(e))
Upon receipt by the Subordination Agent of a Termination Notice with respect to any Liquidity
Facility from the relevant Liquidity Provider as described below under Liquidity Events of
Default, the Subordination Agent shall request a final drawing (a Final Drawing) or a special
termination drawing (the Special Termination Drawing), as applicable, under such Liquidity
Facility in an amount equal to the then Maximum Available Commitment thereunder. The Subordination
Agent will deposit the proceeds of the Final Drawing or the Special Termination Drawing into the
Cash Collateral Account for the related Certificates and will use these proceeds for the same
purposes and under the same circumstances, and subject to the same conditions, as cash payments of
Interest Drawings under such Liquidity Facility would be used. (Liquidity Facilities, Sections
2.02(c) and 2.02(d); Intercreditor Agreement, Sections 3.05(i) and 3.05(k))
Drawings under any Liquidity Facility will be made by delivery by the Subordination Agent of a
certificate in the form required by such Liquidity Facility. Upon receipt of such a certificate,
the relevant Liquidity Provider is obligated to make payment of the drawing requested thereby in
immediately available funds. Upon payment by the relevant Liquidity Provider of the amount
specified in any drawing under any Liquidity Facility, such Liquidity Provider will be fully
discharged of its obligations under such Liquidity Facility with respect to such drawing and will
not thereafter be obligated to make any further payments under such Liquidity Facility in respect
of such drawing to the Subordination Agent or any other person. (Liquidity Facilities, Section
2.02(a))
Reimbursement of Drawings
The Subordination Agent must reimburse amounts drawn under any Liquidity Facility by reason of
an Interest Drawing, Special Termination Drawing, Final Drawing, Downgrade Drawing or Non-Extension
Drawing and pay interest thereon, but only to the extent that the Subordination Agent has funds
available therefor. (Liquidity Facilities, Section 2.09)
Interest Drawings and Final Drawings
Amounts drawn by reason of an Interest Drawing or Final Drawing (each, a Drawing) will be
immediately due and payable, together with interest on the amount of such drawing. From the date of
such drawing to (but excluding) the third business day following the applicable Liquidity
Providers receipt of the notice of such Interest Drawing, interest will accrue at the Base Rate
plus 4.00% per annum. Thereafter,
S-67
interest will accrue at LIBOR for the applicable interest period
plus 4.00% per annum. (Liquidity Facilities, Section 3.07)
Base Rate means a fluctuating interest rate per annum in effect from time to time, which
rate per annum shall at all times be equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged by Federal funds
brokers, as published for each day of the period for which the Base Rate is to be determined (or,
if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or if such rate is not so published for any day that is a Business Day, the average of
the quotations for such day for such transactions received by the applicable Liquidity Provider
from three Federal funds brokers of recognized standing selected by it (and reasonably satisfactory
to Delta) plus one quarter of one percent (0.25%). (Liquidity Facilities, Section 1.01)
LIBOR means, with respect to any interest period, the rate per annum at which U.S. dollars
are offered in the London interbank market as shown on Reuters Screen LIBOR01 (or any successor
thereto) at approximately 11:00 A.M. (London time) two Business Days before the first day of such
interest period, for a period comparable to such interest period, or if such rate is not available,
a rate per annum determined by certain alternative methods. (Liquidity Facilities, Section 1.01)
If at any time, a Liquidity Provider shall have determined (which determination shall be
conclusive and binding upon the Subordination Agent, absent manifest error) that, by reason of
circumstances affecting the relevant interbank lending market generally, the LIBOR rate determined
or to be determined for such interest period will not adequately and fairly reflect the cost to
such Liquidity Provider (as conclusively certified by such Liquidity Provider, absent manifest
error) of making or maintaining advances, such Liquidity Provider shall give facsimile or
telephonic notice thereof (a Rate Determination Notice) to the Subordination Agent. If such
notice is given, then the outstanding principal amount of the LIBOR advances under the related
Liquidity Facility shall be converted to Base Rate advances thereunder effective from the date of
the Rate Determination Notice; provided that the rate then applicable in respect of such Base Rate
advances shall be increased by one percent (1.00%). Each Liquidity Provider shall withdraw a Rate
Determination Notice given under the applicable Liquidity Facility when such Liquidity Provider
determines that the circumstances giving rise to such Rate Determination Notice no longer apply to
such Liquidity Provider, and the Base Rate advances shall be converted to LIBOR advances effective
as the first day of the next succeeding interest period after the date of such withdrawal. Each
change in the Base Rate shall become effective immediately. (Liquidity Facilities, Section 3.07(g))
Downgrade Drawings, Special Termination Drawings, Non-Extension Drawings and Final Drawings
The amount drawn under any Liquidity Facility by reason of a Downgrade Drawing, a Special
Termination Drawing, a Non-Extension Drawing or Final Drawing and deposited in a Cash Collateral
Account will be treated as follows:
|
|
|
such amount will be released on any Distribution Date to the extent that such amount
exceeds the Required Amount, first, to the applicable Liquidity Provider up to the amount
of its Liquidity Obligations owed to it, and second, for distribution pursuant to the
Intercreditor Agreement; |
|
|
|
|
any portion of such amount withdrawn from the Cash Collateral Account for the
applicable Certificates to pay interest distributions on such Certificates will be treated
in the same way as Interest Drawings; and |
|
|
|
|
the balance of such amount will be invested in certain specified eligible investments. |
Any Downgrade Drawing, Special Termination Drawing or Non-Extension Drawing under any
Liquidity Facility, other than any portion thereof applied to the payment of interest distributions
on the Certificates, will bear interest, (a) subject to clauses (b) and (c) below, at a rate equal
to (i) in the case of a Downgrade Drawing, LIBOR for the applicable interest period (or, as
described in the first paragraph under Reimbursement Drawings Interest Drawings and Final
Drawings, the Base Rate) plus a specified margin, (ii) in the case of a Special Termination
Drawing, LIBOR for the applicable interest period (or, as described in the first paragraph under
S-68
Reimbursement Drawings Interest Drawings and Final Drawings, the Base Rate) plus a
specified margin and (iii) in the case of a Non-Extension Drawing, the investment earnings on the
amounts deposited in the Cash Collateral Account on the outstanding amount from time to time of
such Non-Extension Drawing plus a specified margin, (b) from and after the date, if any, on which
such Downgrade Drawing, Special Termination Drawing or Non-Extension Drawing is converted into a
Final Drawing as described below under Liquidity Events of Default, at a rate equal to LIBOR
for the applicable interest period (or, as described in the first paragraph under Reimbursement
of Drawings Interest Drawings and Final Drawings, the Base Rate) plus 4.00% per annum and (c)
from and after the date, if any, on which a Special Termination Notice is given and any Downgrade
Drawing or Non-Extension Drawing is converted into a Special Termination Drawing as described below
under Liquidity Events of Default, at the rate applicable to Special Termination Drawings as
described in clause (a)(ii) above.
Liquidity Events of Default
Events of default under each Liquidity Facility (each, a Liquidity Event of Default) will
consist of:
|
|
|
the acceleration of all of the Equipment Notes; or |
|
|
|
|
certain bankruptcy or similar events involving Delta. (Liquidity Facilities, Section
1.01) |
If (i) any Liquidity Event of Default under any Liquidity Facility has occurred and is
continuing and (ii) less than 65% of the aggregate outstanding principal amount of all Equipment
Notes are Performing Equipment Notes, the applicable Liquidity Provider may, in its discretion,
give a notice of termination of such Liquidity Facility (a Final Termination Notice). With
respect to any Liquidity Facility, if the Pool Balance of the related class of Certificates is
greater than the aggregate outstanding principal amount of the related series of Equipment Notes
(other than any such series of Equipment Notes previously sold or with respect to which the
Aircraft related to such series of Equipment Notes has been disposed of) at any time during the
18-month period prior to the final expected Regular Distribution Date with respect to such class of
Certificates, the Liquidity Provider of such Trust may, in its discretion, give a notice of special
termination of such Liquidity Facility (a Special Termination Notice and, together with the Final
Termination Notice, a Termination Notice). The Termination Notice will have the following
consequences:
|
|
|
the related Liquidity Facility will expire on the fifth Business Day after the date on
which such Termination Notice is received by the Subordination Agent; |
|
|
|
|
the Subordination Agent will promptly request, and the applicable Liquidity Provider
will honor, a Final Drawing or Special Termination Drawing, as applicable, thereunder in
an amount equal to the then Maximum Available Commitment thereunder; |
|
|
|
|
in the event that a Final Drawing is made, any Drawing remaining unreimbursed as of the
date of termination will be automatically converted into a Final Drawing under such
Liquidity Facility; |
|
|
|
|
in the event a Special Termination Notice is given, all amounts owing to the applicable
Liquidity Provider will be treated as a Special Termination Drawing for the purposes set
forth under Description of the Intercreditor Agreement Priority of Distributions; and |
|
|
|
|
all amounts owing to the applicable Liquidity Provider will be automatically
accelerated. (Liquidity Facilities, Section 6.01) |
Notwithstanding the foregoing, the Subordination Agent will be obligated to pay amounts owing
to the applicable Liquidity Provider only to the extent of funds available therefor after giving
effect to the
S-69
payments in accordance with the provisions set forth under Description of the
Intercreditor Agreement Priority of Distributions. (Liquidity Facilities, Section 2.09) Upon
the circumstances described below under Description of the Intercreditor Agreement
Intercreditor Rights, a Liquidity Provider may become the Controlling Party with respect to the
exercise of remedies under the Indentures. (Intercreditor Agreement, Section 2.06(c))
The Liquidity Provider
The initial Class B Liquidity Provider will be Natixis S.A., acting via its New York Branch.
Natixis S.A., acting via its New York Branch, is also the initial Class A Liquidity Provider.
S-70
DESCRIPTION OF THE INTERCREDITOR AGREEMENT
The following summary describes certain material provisions of an intercreditor agreement,
dated as of April 5, 2011, among the Class A Trustee, the Class A Liquidity Provider and U.S. Bank
Trust National Association, as subordination agent (the Subordination Agent), as amended by
Amendment No. 1 to Intecreditor Agreement, to be dated the Class B Issuance Date, among the Class A
Trustee, the Class A Liquidity Provider, the Class B Trustee, the Class B Liquidity Provider, the
Subordination Agent and Delta, by which, among other things, the Class B Trustee and Class B
Liquidity Provider will each become a party thereto (as so amended, the Intercreditor Agreement).
The summary does not purport to be complete and is qualified in its entirety by reference to all of
the provisions of the Intercreditor Agreement, a copy of which will be filed as an exhibit to a
Current Report on Form 8-K to be filed by Delta with the SEC.
Intercreditor Rights
General
The Equipment Notes relating to each Trust will be issued to, and registered in the name of,
the Subordination Agent, as agent and trustee for the Trustee of such Trust. (Intercreditor
Agreement, Section 2.01(a))
Controlling Party
Each Loan Trustee will be directed, so long as no Indenture Event of Default shall have
occurred and be continuing under an Indenture and subject to certain limitations described below,
in taking, or refraining from taking, any action thereunder or with respect to the Equipment Notes
issued under such Indenture, by the holders of at least a majority of the outstanding principal
amount of the Equipment Notes issued under such Indenture. See Voting of Equipment Notes
below. For so long as the Subordination Agent is the registered holder of the Equipment Notes, the
Subordination Agent will act with respect to the preceding sentence in accordance with the
directions of the Trustees for whom the Equipment Notes issued under such Indenture are held as
Trust Property, to the extent constituting, in the aggregate, directions with respect to the
required principal amount of Equipment Notes.
After the occurrence and during the continuance of an Indenture Event of Default under an
Indenture, each Loan Trustee will be directed in taking, or refraining from taking, any action
thereunder or with respect to the Equipment Notes issued under such Indenture, including
acceleration of such Equipment Notes or foreclosing the lien on the related Aircraft with respect
to which such Equipment Note was issued, by the Controlling Party, subject to the limitations
described below. See Description of the Certificates Indenture Events of Default and Certain
Rights Upon an Indenture Event of Default for a description of the rights of the
Certificateholders of each Trust to direct the respective Trustees. (Intercreditor Agreement,
Section 2.06(a))
The Controlling Party will be:
|
|
|
if Final Distributions have not been paid in full to the holders of Class A
Certificates, the Class A Trustee; |
|
|
|
|
if Final Distributions have been paid in full to the holders of the Class A
Certificates, but not to the holders of the Class B Certificates, the Class B Trustee; and |
|
|
|
|
under certain circumstances, and notwithstanding the foregoing, the Liquidity Provider
with the largest amount owed to it, as discussed in the next paragraph. (Intercreditor
Agreement, Sections 2.06(b) and (c)) |
S-71
At any time after 18 months from the earliest to occur of (x) the date on which the entire
available amount under any Liquidity Facility shall have been drawn (excluding a Downgrade Drawing
or Non-Extension Drawing (but including a Final Drawing, a Special Termination Drawing or a
Downgrade Drawing or Non-Extension Drawing that has been converted to a Final Drawing under such
Liquidity Facility)) and remains unreimbursed, (y) the date on which the entire amount of any
Downgrade Drawing or Non-Extension Drawing shall have been withdrawn from the relevant Cash
Collateral Account to pay interest on the relevant class of Certificates and remains unreimbursed
and (z) the date on which all Equipment Notes under all Indentures shall have been accelerated, the
Liquidity Provider with the highest amount of unreimbursed Liquidity Obligations due to it (so long
as such Liquidity Provider has not defaulted in its obligations to make any drawing under any
Liquidity Facility) will have the right to elect to become the Controlling Party with respect to
any Indenture. (Intercreditor Agreement, Section 2.06(c))
For purposes of giving effect to the rights of the Controlling Party, the Trustees (other than
the Controlling Party) will irrevocably agree, and the Certificateholders (other than the
Certificateholders represented by the Controlling Party) will be deemed to agree by virtue of their
purchase of Certificates, that the Subordination Agent, as record holder of the Equipment Notes,
shall exercise its voting rights in respect of the Equipment Notes held by the Subordination Agent
as directed by the Controlling Party and any vote so exercised shall be binding upon the Trustees
and Certificateholders, subject to certain limitations. (Intercreditor Agreement, Section 2.06) For
a description of certain limitations on the Controlling Partys rights to exercise remedies, see
Limitation on Exercise of Remedies and Description of the Equipment Notes Remedies.
Final Distributions means, with respect to the Certificates of any Trust on any Distribution
Date, the sum of (x) the aggregate amount of all accrued and unpaid interest on such Certificates
(excluding interest payable on the Deposits relating to such Trust) and (y) the Pool Balance of
such Certificates as of the immediately preceding Distribution Date (less the amount of the
Deposits for such class of Certificates as of such preceding Distribution Date other than any
portion of such Deposits thereafter used to acquire Equipment Notes pursuant to the Note Purchase
Agreement). For purposes of calculating Final Distributions with respect to the Certificates of any
Trust, any Make-Whole Amount paid on the Equipment Notes held in such Trust which has not been
distributed to the Certificateholders of such Trust (other than such Make-Whole Amount or a portion
thereof applied to the payment of interest on the Certificates of such Trust or the reduction of
the Pool Balance of such Trust) shall be added to the amount of such Final Distributions.
(Intercreditor Agreement, Section 1.01)
Limitation on Exercise of Remedies
So long as any Certificates are outstanding, during the period ending on the date which is
nine months after the earlier of (x) the acceleration of the Equipment Notes under any Indenture
and (y) the bankruptcy or insolvency of Delta, without the consent of each Trustee (other than the
Trustee of any Trust all of the Certificates of which are held or beneficially owned by Delta or
its affiliates), no Aircraft subject to the lien of such Indenture or such Equipment Notes may be
sold in the exercise of remedies under such Indenture, if the net proceeds from such sale would be
less than the Minimum Sale Price for such Aircraft or such Equipment Notes. (Intercreditor
Agreement, Section 4.01(a)(iii))
Minimum Sale Price means, with respect to any Aircraft or the Equipment Notes issued in
respect of such Aircraft, at any time, the lesser of (1) in the case of the sale of an Aircraft,
80%, or, in the case of the sale of such related Equipment Notes, 90%, of the Appraised Current
Market Value of such Aircraft and (2) the sum of the aggregate Note Target Price of such Equipment
Notes and an amount equal to the Excess Liquidity Obligations in respect of the Indenture under
which such Equipment Notes were issued. (Intercreditor Agreement, Section 1.01)
Excess Liquidity Obligations means, with respect to an Indenture, an amount equal to the sum
of (i) the amount of fees payable to the Liquidity Provider with respect to each Liquidity
Facility, multiplied by a fraction, the numerator of which is the then outstanding aggregate
principal amount of the Series A Equipment Notes and Series B Equipment Notes issued under such
Indenture and the denominator of which is the then outstanding aggregate principal amount of all
Series A Equipment Notes and Series B
S-72
Equipment Notes, (ii) interest on any Special
Termination Drawing, Downgrade Drawing or Non-Extension Drawing payable under each Liquidity
Facility in excess of investment earnings on such drawing multiplied by the fraction specified in
clause (i) above, (iii) if any payment default by Delta exists with respect to interest on any
Series A Equipment Notes or Series B Equipment Notes, interest on any Interest Drawing (or portion
of any Downgrade Drawing, Non-Extension Drawing or Special Termination Drawing that is used to pay
interest on the Certificates) or Final Drawing payable under each Liquidity Facility in excess of
the sum of (a) investment earnings from any Final Drawing plus (b) any interest at the past due
rate actually payable (whether or not in fact paid) by Delta on the overdue scheduled interest on
the Series A Equipment Notes and Series B Equipment Notes in respect of which such Drawing was made
(or portion of any Downgrade Drawing, Non-Extension Drawing or Special Termination Drawing was
used), multiplied by a fraction the numerator of which is the aggregate overdue amounts of interest
on the Series A Equipment Notes and Series B Equipment Notes issued under such Indenture (other
than interest becoming due and payable solely as a result of acceleration of any such Equipment
Notes) and the denominator of which is the then aggregate overdue amounts of interest on all Series
A Equipment Notes and Series B Equipment Notes (other than interest becoming due and payable solely
as a result of acceleration of any such Equipment Notes), and (iv) any other amounts owed to a
Liquidity Provider by the Subordination Agent as borrower under each Liquidity Facility other than
amounts due as repayment of advances thereunder or as interest on such advances, except to the
extent payable pursuant to clauses (ii) and (iii) above, multiplied by the fraction specified in
clause (i) above. (Indentures, Section 2.14) The foregoing definition shall be revised accordingly
to reflect, if applicable, any Replacement Facility or any liquidity facility for any Refinancing
Certificates. See Possible Refinancing of Class B Certificates.
Note Target Price means, for any Equipment Note issued under any Indenture: (i) the
aggregate outstanding principal amount of such Equipment Note, plus (ii) the accrued and unpaid
interest thereon, together with all other sums owing on or in respect of such Equipment Note
(including, without limitation, enforcement costs incurred by the Subordination Agent in respect of
such Equipment Note). (Intercreditor Agreement, Section 1.01)
Following the occurrence and during the continuation of an Indenture Event of Default under
any Indenture, in the exercise of remedies pursuant to such Indenture, the Loan Trustee under such
Indenture may be directed to lease the related Aircraft to any person (including Delta) so long as
the Loan Trustee in doing so acts in a commercially reasonable manner within the meaning of
Article 9 of the Uniform Commercial Code as in effect in any applicable jurisdiction (including
Sections 9-610 and 9-627 thereof). (Intercreditor Agreement, Section 4.01(a)(ii))
If following certain events of bankruptcy, reorganization or insolvency with respect to Delta
described in the Intercreditor Agreement (a Delta Bankruptcy Event) and during the pendency
thereof, the Controlling Party receives a proposal from or on behalf of Delta to restructure the
financing of any one or more of the Aircraft, the Controlling Party will promptly thereafter give
the Subordination Agent, each Trustee and each Liquidity Provider that has not made a Final Drawing
notice of the material economic terms and conditions of such restructuring proposal whereupon the
Subordination Agent acting on behalf of each Trustee will post such terms and conditions of such
restructuring proposal on DTCs Internet bulletin board or make such other commercially reasonable
efforts as the Subordination Agent may deem appropriate to make such terms and conditions available
to all Certificateholders. Thereafter, neither the Subordination Agent nor any Trustee, whether
acting on instructions of the Controlling Party or otherwise, may, without the consent of each
Trustee and each Liquidity Provider that has not made a Final Drawing, enter into any term sheet,
stipulation or other agreement (a Restructuring Arrangement) (whether in the form of an adequate
protection stipulation, an extension under Section 1110(b) of the Bankruptcy Code or otherwise) to
effect any such restructuring proposal with or on behalf of Delta unless and until the material
economic terms and conditions of such restructuring proposal shall have been made available to all
Certificateholders and each Liquidity Provider that has not made a Final Drawing, for a period of
not less than 15 calendar days (except that such requirement shall not apply to any such
Restructuring Arrangement that is effective (whether prospectively or retrospectively) as of a date
on or before the expiration of the 60-day period under Section 1110 and to be effective, initially,
for a period not longer than three months from the expiry of such 60-day
period (an Interim Restructuring Arrangement)). The requirements described in the
immediately preceding sentence (i) will not apply to any extension of a Restructuring
S-73
Arrangement
with respect to which such requirements have been complied with in connection with the original
entry of such Restructuring Arrangement if the possibility of such extension has been disclosed in
satisfaction of the notification requirements and such extension shall not amend or modify any of
the other terms and conditions of such Restructuring Arrangement and (ii) will apply to the initial
extension of an Interim Restructuring Arrangement beyond the three months following the expiry of
the 60-day period but not to any subsequent extension of such Interim Restructuring Arrangement, if
the possibility of such subsequent extension has been disclosed in satisfaction of the notification
requirements and such subsequent extension shall not amend or modify any of the other terms and
conditions of such Interim Restructuring Arrangement. (Intercreditor Agreement, Section 4.01(c))
In the event that any Class B Certificateholder gives irrevocable notice of the exercise of
its right to purchase all (but not less than all) of the Class A Certificates represented by the
then Controlling Party (as described in Description of the Certificates Certificate Buyout
Right of Class B Certificateholders) prior to the expiry of the applicable notice period specified
above, such Controlling Party may not direct the Subordination Agent or any Trustee to enter into
any such restructuring proposal with respect to any of the Aircraft, unless and until such Class B
Certificateholder fails to purchase such Class A Certificates on the date that it is required to
make such purchase. (Intercreditor Agreement, Section 4.01(c))
Post Default Appraisals
Upon the occurrence and continuation of an Indenture Event of Default under any Indenture, the
Subordination Agent will be required to obtain three desktop appraisals from the appraisers
selected by the Controlling Party setting forth the current market value, current lease rate and
distressed value (in each case, as defined by the International Society of Transport Aircraft
Trading or any successor organization) of the Aircraft subject to such Indenture (each such
appraisal, an Appraisal and the current market value appraisals being referred to herein as the
Post Default Appraisals). For so long as any Indenture Event of Default shall be continuing under
any Indenture, and without limiting the right of the Controlling Party to request more frequent
Appraisals, the Subordination Agent will be required to obtain additional Appraisals on the date
that is 364 days from the date of the most recent Appraisal or if a Delta Bankruptcy Event shall
have occurred and is continuing, on the date that is 180 days from the date of the most recent
Appraisal and shall (acting on behalf of each Trustee) post such Appraisals on DTCs Internet
bulletin board or make such other commercially reasonable efforts as the Subordination Agent may
deem appropriate to make such Appraisals available to all Certificateholders. (Intercreditor
Agreement, Section 4.01(a)(iv))
Appraised Current Market Value of any Aircraft means the lower of the average and the median
of the three most recent Post Default Appraisals of such Aircraft. (Intercreditor Agreement,
Section 1.01)
Priority of Distributions
All payments in respect of the Equipment Notes and certain other payments received on each
Regular Distribution Date or Special Distribution Date will be promptly distributed by the
Subordination Agent on such Regular Distribution Date or Special Distribution Date in the following
order of priority:
|
|
|
to the Subordination Agent, any Trustee, any Certificateholder and any Liquidity
Provider to the extent required to pay certain
out-of-pocket costs and expenses actually
incurred by the Subordination Agent (or reasonably expected to be incurred by the
Subordination Agent for the period ending on the next succeeding Regular Distribution
Date, which shall not exceed $150,000 unless approved in writing by the Controlling Party
and accompanied by evidence that such costs are actually expected to be incurred) or any
Trustee or to reimburse any Certificateholder or any Liquidity Provider in respect of
payments made to the Subordination Agent or any Trustee in connection with the protection
or realization of the value of the Equipment Notes held by the
Subordination Agent or any Collateral under (and as defined in) any Indenture
(collectively, the Administration Expenses); |
S-74
|
|
|
to each Liquidity Provider (a) to the extent required to pay the accrued and unpaid
Liquidity Expenses or (b) in the case of a Special Payment on account of the redemption,
purchase or prepayment of the Equipment Notes issued pursuant to an Indenture (an
Equipment Note Special Payment), so long as no Indenture Event of Default has occurred
and is continuing under any Indenture, the amount of accrued and unpaid Liquidity Expenses
that are not yet overdue, multiplied by the Applicable Fraction or, if an Indenture Event
of Default has occurred and is continuing, clause (a) will apply; |
|
|
|
|
to each Liquidity Provider (i)(a) to the extent required to pay interest accrued and
unpaid on the Liquidity Obligations or (b) in the case of an Equipment Note Special
Payment, so long as no Indenture Event of Default has occurred and is continuing under any
Indenture, to the extent required to pay accrued and unpaid interest then overdue on the
Liquidity Obligations, plus an amount equal to the amount of accrued and unpaid interest
on the Liquidity Obligations not yet overdue, multiplied by the Applicable Fraction or, if
an Indenture Event of Default has occurred and is continuing, clause (a) will apply and
(ii) if a Special Termination Drawing has been made under a Liquidity Facility that has
not been converted into a Final Drawing, the outstanding amount of such Special
Termination Drawing under such Liquidity Facility; |
|
|
|
|
to (i) if applicable, unless (in the case of this clause (i) only) (x) less than 65% of
the aggregate outstanding principal amount of all Equipment Notes are Performing Equipment
Notes and a Liquidity Event of Default shall have occurred and be continuing under a
Liquidity Facility or (y) a Final Drawing shall have occurred under a Liquidity Facility,
the funding of the Cash Collateral Account with respect to such Liquidity Facility up to
the Required Amount for the related class of Certificates and (ii) each Liquidity Provider
to the extent required to pay the outstanding amount of all Liquidity Obligations; |
|
|
|
|
to the Subordination Agent, any Trustee or any Certificateholder to the extent required
to pay certain fees, taxes, charges and other amounts payable; |
|
|
|
|
to the Class A Trustee (a) to the extent required to pay accrued and unpaid interest at
the Stated Interest Rate on the Pool Balance of the Class A Certificates (excluding
interest, if any, payable with respect to the Class A Deposits) or (b) in the case of an
Equipment Note Special Payment, so long as no Indenture Event of Default has occurred and
is continuing under any Indenture, to the extent required to pay any such interest that is
then accrued, due and unpaid together with (without duplication) accrued and unpaid
interest at the Stated Interest Rate on the outstanding principal amount of the Series A
Equipment Notes held in the Class A Trust being redeemed, purchased or prepaid or, if an
Indenture Event of Default has occurred and is continuing, clause (a) will apply; |
|
|
|
|
to the Class B Trustee (a) to the extent required to pay unpaid Class B Adjusted
Interest on the Class B Certificates (excluding interest, if any, payable with respect to
the Class B Deposits) or (b) in the case of an Equipment Note Special Payment, so long as
no Indenture Event of Default has occurred and is continuing under any Indenture, to the
extent required to pay any accrued, due and unpaid Class B Adjusted Interest (excluding
interest, if any, payable with respect to the Deposits relating to such class of
Certificates) or, if an Indenture Event of Default has occurred and is continuing, clause
(a) will apply; |
|
|
|
|
to the Class A Trustee to the extent required to pay Expected Distributions on the
Class A Certificates; |
|
|
|
|
to the Class B Trustee (a) to the extent required to pay accrued and unpaid interest at
the Stated Interest Rate on the Pool Balance of the Class B Certificates (other than Class
B Adjusted Interest
paid above) (excluding interest, if any, payable with respect to the Deposits relating to
such class of Certificates) or (b) in the case of an Equipment Note Special Payment, so
long as no Indenture Event of Default has occurred and is continuing under any Indenture,
to the extent required to pay any such interest that is then accrued, due and unpaid (other
than Class B Adjusted Interest paid |
S-75
|
|
|
above) together with (without duplication) accrued and
unpaid interest at the Stated Interest Rate on the outstanding principal amount of the
Series B Equipment Notes held in the Class B Trust and being redeemed, purchased or prepaid
or, if an Indenture Event of Default has occurred and is continuing, clause (a) will apply;
and |
|
|
|
|
to the Class B Trustee to the extent required to pay Expected Distributions on the
Class B Certificates. (Intercreditor Agreement, Sections 2.04 and 3.02) |
Applicable Fraction means, with respect to any Special Distribution Date, a fraction, the
numerator of which shall be the amount of principal of the applicable Series A Equipment Notes and
Series B Equipment Notes being redeemed, purchased or prepaid on such Special Distribution Date,
and the denominator of which shall be the aggregate unpaid principal amount of all Series A
Equipment Notes and Series B Equipment Notes outstanding as of such Special Distribution Date
immediately before giving effect to such redemption, purchase or prepayment.
Liquidity Obligations means, with respect to each Liquidity Provider, the obligations to
reimburse or to pay such Liquidity Provider all principal, interest, fees and other amounts owing
to it under the applicable Liquidity Facility or certain other agreements. (Intercreditor
Agreement, Section 1.01)
Liquidity Expenses means, with respect to each Liquidity Provider, all Liquidity Obligations
other than any interest accrued thereon or the principal amount of any drawing under the applicable
Liquidity Facility. (Intercreditor Agreement, Section 1.01)
Expected Distributions means, with respect to the Certificates of any Trust on any
Distribution Date (the Current Distribution Date), the difference between:
(A) the Pool Balance of such Certificates as of the immediately preceding Distribution
Date (or, if the Current Distribution Date is the first Distribution Date after the
issuance date of such Certificates, the original aggregate face amount of the Certificates
of such Trust); and
(B) the Pool Balance of such Certificates as of the Current Distribution Date
calculated on the basis that (i) the principal of any Equipment Notes other than Performing
Equipment Notes held in such Trust has been paid in full and such payments have been
distributed to the holders of such Certificates, (ii) the principal of any Performing
Equipment Notes held in such Trust has been paid when due (whether at stated maturity or
upon prepayment or purchase or otherwise, but without giving effect to any acceleration of
Performing Equipment Notes) and such payments have been distributed to the holders of such
Certificates and (iii) the principal of any Equipment Notes formerly held in such Trust
that have been sold pursuant to the Intercreditor Agreement has been paid in full and such
payments have been distributed to the holders of such Certificates, but without giving
effect to any reduction in the Pool Balance as a result of any distribution attributable to
Deposits relating to such Trust occurring after the immediately preceding Distribution Date
(or, if the Current Distribution Date is the first Distribution Date, occurring after the
initial issuance of the Certificates of such Trust).
For purposes of calculating Expected Distributions with respect to the Certificates of any
Trust, any Make-Whole Amount paid on the Equipment Notes held in such Trust that has not been
distributed to the Certificateholders of such Trust (other than such Make-Whole Amount or a portion
thereof applied to the payment of interest on the Certificates of such Trust or the reduction of
the Pool Balance of such Trust) shall be added to the amount of Expected Distributions.
(Intercreditor Agreement, Section 1.01)
Class B Adjusted Interest means, as of any Current Distribution Date, (I) any interest
described in clause (II) of this definition accrued prior to the immediately preceding Distribution
Date which remains unpaid and (II) the sum of (x) interest determined at the Stated Interest Rate
for the Class B Certificates for the period commencing on, and including, the immediately preceding
Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the Class B
Issuance Date) and ending on, but excluding,
S-76
the Current Distribution Date, on the Eligible B Pool
Balance on such Distribution Date and (y) the sum of interest for each Series B Equipment Note with
respect to which, or with respect to the Aircraft with respect to which such Equipment Note was
issued, a disposition, distribution, sale or Deemed Disposition Event has occurred, since the
immediately preceding Distribution Date (but only if no such event has previously occurred with
respect to such Series B Equipment Note), determined at the Stated Interest Rate for the Class B
Certificates for each day during the period commencing on, and including, the immediately preceding
Distribution Date (or, if the current Distribution Date is the first Distribution Date, the Class B
Issuance Date) and ending on, but excluding, the date of the earliest of such disposition,
distribution, sale or Deemed Disposition Event with respect to such Series B Equipment Note or
Aircraft, as the case may be, on the principal amount of such Series B Equipment Note calculated
pursuant to clause (B)(i), (ii), (iii) or (iv), as applicable, of the definition of Eligible B Pool
Balance. (Intercreditor Agreement, Section 1.01)
Eligible B Pool Balance means, as of any date of determination, the excess of (A) the Pool
Balance of the Class B Certificates as of the immediately preceding Distribution Date (or, if such
date of determination is on or before the first Distribution Date after the Class B Issuance Date,
the original aggregate face amount of the Class B Certificates) (after giving effect to payments
made on such date of determination) over (B) the sum of, with respect to each Series B Equipment
Note, one of the following amounts, if applicable: (i) if there has previously been a sale or
disposition by the applicable Loan Trustee of the Aircraft for cash under (and as defined in) the
related Indenture, the outstanding principal amount of such Series B Equipment Note that remains
unpaid as of such date of determination subsequent to such sale or disposition and after giving
effect to any distributions of the proceeds of such sale or disposition applied under such
Indenture to the payment of such Series B Equipment Note, (ii) if there has previously been an
Event of Loss with respect to the applicable Aircraft to which such Series B Equipment Note
relates, the outstanding principal amount of such Series B Equipment Note that remains unpaid as of
such date of determination subsequent to the scheduled date of mandatory redemption of such Series
B Equipment Note following Event of Loss and after giving effect to the distributions of any
proceeds in respect of such Event of Loss applied under such Indenture to the payment of such
Series B Equipment Note, (iii) if such Series B Equipment Note has previously been sold for cash by
the Subordination Agent, the excess, if any, of (x) the outstanding amount of principal and
interest as of the date of such sale by the Subordination Agent of such Series B Equipment Note
over (y) the purchase price received with respect to such sale of such Series B Equipment Note for
cash (net of any applicable costs and expenses of such sale) or (iv) if a Deemed Disposition Event
has occurred with respect to such Series B Equipment Note, the outstanding principal amount of such
Series B Equipment Note; provided, however, that if more than one of the clauses (i), (ii), (iii)
and (iv) is applicable to any one Series B Equipment Note, only the amount determined pursuant to
the clause that first became applicable shall be counted with respect to such Series B Equipment
Note. (Intercreditor Agreement, Section 1.01)
Deemed Disposition Event means, in respect of any Equipment Note, the continuation of an
Indenture Event of Default in respect of such Equipment Note without an Actual Disposition Event
occurring in respect of such Equipment Note for a period of four years from the date of the
occurrence of such Indenture Event of Default. (Intercreditor Agreement, Section 1.01)
Actual Disposition Event means, in respect of any Equipment Note, (i) the sale or
disposition by the applicable Loan Trustee for cash of the Aircraft securing such Equipment Note,
(ii) the occurrence of the mandatory redemption date for such Equipment Note following an Event of
Loss with respect to such Aircraft or (iii) the sale by the Subordination Agent of such Equipment
Note for cash. (Intercreditor Agreement, Section 1.01)
Interest Drawings under the applicable Liquidity Facility and withdrawals from the applicable
Cash Collateral Account, in respect of interest on the Certificates of the Class A Trust or the
Class B Trust, as
applicable, will be distributed to the Trustee for such class of Certificates, notwithstanding
the priority of distributions set forth in the Intercreditor Agreement and otherwise described
herein. All amounts on deposit in the Cash Collateral Account for any such Trust that are in excess
of the Required Amount will be paid to the applicable Liquidity Provider. (Intercreditor Agreement,
Section 3.05(f))
S-77
Voting of Equipment Notes
In the event that the Subordination Agent, as the registered holder of any Equipment Note,
receives a request for its consent to any amendment, supplement, modification, approval, consent or
waiver under such Equipment Note or the related Indenture or the related Participation Agreement or
other related document, (i) if no Indenture Event of Default shall have occurred and be continuing
with respect to such Indenture, the Subordination Agent shall request directions from the
Trustee(s) and shall vote or consent in accordance with such directions and (ii) if any Indenture
Event of Default shall have occurred and be continuing with respect to such Indenture, the
Subordination Agent will exercise its voting rights as directed by the Controlling Party, subject
to certain limitations; provided that no such amendment, supplement, modification, approval,
consent or waiver shall, without the consent of each Liquidity Provider, reduce the amount of
principal or interest payable by Delta under any Equipment Note. In addition, see the last
paragraph under Description of the Certificates Modification of the Pass Through Trust
Agreements and Certain Other Agreements for a description of the additional Certificateholder
consent requirements with respect to amendments, supplements, modifications, approvals, consents or
waivers of the Indentures, Equipment Notes, Participation Agreements, Note Purchase Agreement or
other related documents. (Intercreditor Agreement, Section 8.01(b))
List of Certificateholders
Upon the occurrence of an Indenture Event of Default, the Subordination Agent shall instruct
the Trustees to, and the Trustees shall, request that DTC post on its Internet bulletin board a
securities position listing setting forth the names of all the parties reflected on DTCs books as
holding interests in the Certificates. (Intercreditor Agreement, Section 5.01(c))
Reports
Promptly after the occurrence of a Triggering Event or an Indenture Event of Default resulting
from the failure of Delta to make payments on any Equipment Note and on every Regular Distribution
Date while the Triggering Event or such Indenture Event of Default shall be continuing, the
Subordination Agent will provide to the Trustees, the Liquidity Providers, the Rating Agencies and
Delta a statement setting forth the following information:
|
|
|
after a Delta Bankruptcy Event, with respect to each Aircraft, whether such Aircraft is
(i) subject to the 60-day period of Section 1110, (ii) subject to an election by Delta
under Section 1110(a) of the Bankruptcy Code, (iii) covered by an agreement contemplated
by Section 1110(b) of the Bankruptcy Code or (iv) not subject to any of (i), (ii) or
(iii); |
|
|
|
|
to the best of the Subordination Agents knowledge, after requesting such information
from Delta, (i) whether the Aircraft are currently in service or parked in storage, (ii)
the maintenance status of the Aircraft and (iii) location of the Engines. Delta has agreed
to provide such information upon request of the Subordination Agent, but no more
frequently than every three months with respect to each Aircraft so long as it is subject
to the lien of an Indenture (Note Purchase Agreement, Section 4(a)(vi)); |
|
|
|
|
the current Pool Balance of each class of Certificates, the Eligible B Pool Balance (if
any) and outstanding principal amount of all Equipment Notes for all Aircraft; |
|
|
|
|
the expected amount of interest which will have accrued on the Equipment Notes and on
the Certificates as of the next Regular Distribution Date; |
|
|
|
|
the amounts paid to each person on such Distribution Date pursuant to the Intercreditor
Agreement; |
S-78
|
|
|
details of the amounts paid on such Distribution Date identified by reference to the
relevant provision of the Intercreditor Agreement and the source of payment (by Aircraft
and party); |
|
|
|
|
if the Subordination Agent has made a Final Drawing or a Special Termination Drawing
under any Liquidity Facility; |
|
|
|
|
the amounts currently owed to each Liquidity Provider; |
|
|
|
|
the amounts drawn under each Liquidity Facility; and |
|
|
|
|
after a Delta Bankruptcy Event, any operational reports filed by Delta with the
bankruptcy court which are available to the Subordination Agent on a non-confidential
basis. (Intercreditor Agreement, Section 5.01(d)) |
The Subordination Agent
U.S. Bank Trust National Association will be the Subordination Agent under the Intercreditor
Agreement. Delta and its affiliates may from time to time enter into banking and trustee
relationships with the Subordination Agent and its affiliates. The Subordination Agents address is
U.S. Bank Trust National Association, One Federal Street, 3rd Floor, Mail Code
EX-MA-FED, Boston, Massachusetts 02110, Attention: Corporate Trust Services.
The Subordination Agent may resign at any time, in which event a successor Subordination Agent
will be appointed as provided in the Intercreditor Agreement. Delta (unless an Indenture Event of
Default has occurred and is continuing) or the Controlling Party may remove the Subordination Agent
for cause as provided in the Intercreditor Agreement. In such circumstances, a successor
Subordination Agent will be appointed as provided in the Intercreditor Agreement. Any resignation
or removal of the Subordination Agent and appointment of a successor Subordination Agent does not
become effective until acceptance of the appointment by the successor Subordination Agent.
(Intercreditor Agreement, Section 7.01(a))
S-79
DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS
The Aircraft
The Trusts are expected to hold Equipment Notes issued for, and secured by, the Aircraft,
consisting of (a) ten Boeing 737-832 aircraft delivered new to Delta from 2000 to 2001, (b) twelve
Boeing 757-232 aircraft delivered new to Delta from 1995 to 2001 and (c) four Boeing 767-332ER
aircraft delivered new to Delta in 1998. The airframe constituting part of an Aircraft is referred
to herein as an Airframe, and each engine constituting part of an Aircraft is referred to herein
as an Engine. Each Aircraft is owned and is being operated by Delta. The Aircraft have been
designed to comply with Stage 3 noise level standards, which are the most restrictive regulatory
standards currently in effect in the United States with respect to the Aircraft for aircraft noise
abatement. The ER designation is provided by the manufacturer and is not recognized by the FAA.
The Boeing 737-832 is a single-aisle commercial jet aircraft. Seating capacity is 160 seats in
Deltas standard configuration. The 737-832 is currently deployed primarily on Deltas North
American routes, as well as to cities in the Caribbean and Central America. The 737-832 Aircraft
are powered by two CFM56-7B24 jet engines manufactured by CFM International, Inc.
The Boeing 757-232 is a single-aisle commercial jet aircraft. Seating capacity is 183 or 184
seats in Deltas two configurations. The
757-232 is currently deployed primarily on Deltas North
American routes, as well as to cities in the Caribbean, Central America and northern South America.
The 757-232 Aircraft are powered by two PW2037 jet engines manufactured by Pratt & Whitney.
The Boeing 767-332ER is a twin-aisle commercial jet aircraft. Seating capacities range from
219 to 221 seats in Deltas various international configurations. The 767-332ER is currently
deployed primarily on Deltas transoceanic routes. The 767-332ER Aircraft are powered by two
CF6-80C2B6F jet engines manufactured by General Electric Company.
The Appraisals
The table below sets forth the appraised values of the Aircraft, as determined by AISI, BK and
MBA, independent aircraft appraisal and consulting firms, and certain additional information
regarding such Aircraft.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registration |
|
Manufacturers |
|
Month of |
|
Appraisers Valuations |
|
Appraised |
Aircraft Type |
|
Number |
|
Serial Number |
|
Delivery |
|
AISI |
|
BK |
|
MBA |
|
Value(1) |
Boeing 737-832 |
|
N3737C |
|
30799 |
|
November 2000 |
|
$ |
20,960,000 |
|
|
$ |
27,156,000 |
|
|
$ |
26,040,000 |
|
|
$ |
24,718,667 |
|
Boeing 737-832 |
|
N3738B |
|
30382 |
|
December 2000 |
|
|
20,350,000 |
|
|
|
27,177,000 |
|
|
|
25,500,000 |
|
|
|
24,342,333 |
|
Boeing 737-832 |
|
N3739P |
|
30541 |
|
December 2000 |
|
|
20,450,000 |
|
|
|
27,189,000 |
|
|
|
25,560,000 |
|
|
|
24,399,667 |
|
Boeing 737-832 |
|
N3740C |
|
30800 |
|
December 2000 |
|
|
20,570,000 |
|
|
|
27,207,000 |
|
|
|
25,600,000 |
|
|
|
24,459,000 |
|
Boeing 737-832 |
|
N3741S |
|
30487 |
|
January 2001 |
|
|
22,180,000 |
|
|
|
27,679,000 |
|
|
|
25,740,000 |
|
|
|
25,199,667 |
|
Boeing 737-832 |
|
N3742C |
|
30835 |
|
February 2001 |
|
|
22,000,000 |
|
|
|
27,690,000 |
|
|
|
25,770,000 |
|
|
|
25,153,333 |
|
Boeing 737-832 |
|
N3743H |
|
30836 |
|
February 2001 |
|
|
22,060,000 |
|
|
|
27,673,000 |
|
|
|
25,810,000 |
|
|
|
25,181,000 |
|
Boeing 737-832 |
|
N3744F |
|
30837 |
|
May 2001 |
|
|
21,950,000 |
|
|
|
28,156,000 |
|
|
|
26,150,000 |
|
|
|
25,418,667 |
|
Boeing 737-832 |
|
N3745B |
|
32373 |
|
June 2001 |
|
|
22,020,000 |
|
|
|
28,161,000 |
|
|
|
26,220,000 |
|
|
|
25,467,000 |
|
Boeing 737-832 |
|
N3747D |
|
32374 |
|
May 2001 |
|
|
21,790,000 |
|
|
|
28,036,000 |
|
|
|
25,920,000 |
|
|
|
25,248,667 |
|
Boeing 757-232 |
|
N685DA |
|
27588 |
|
March 1995 |
|
|
12,150,000 |
|
|
|
15,189,000 |
|
|
|
13,530,000 |
|
|
|
13,530,000 |
|
Boeing 757-232 |
|
N686DA |
|
27589 |
|
September 1995 |
|
|
13,390,000 |
|
|
|
17,181,000 |
|
|
|
15,340,000 |
|
|
|
15,303,667 |
|
Boeing 757-232 |
|
N687DL |
|
27586 |
|
May 1998 |
|
|
16,110,000 |
|
|
|
19,052,000 |
|
|
|
18,380,000 |
|
|
|
17,847,333 |
|
Boeing 757-232 |
|
N688DL |
|
27587 |
|
May 1998 |
|
|
13,640,000 |
|
|
|
15,975,000 |
|
|
|
16,180,000 |
|
|
|
15,265,000 |
|
Boeing 757-232 |
|
N689DL |
|
27172 |
|
June 1998 |
|
|
16,320,000 |
|
|
|
19,110,000 |
|
|
|
18,540,000 |
|
|
|
17,990,000 |
|
Boeing 757-232 |
|
N690DL |
|
27585 |
|
June 1998 |
|
|
14,390,000 |
|
|
|
17,043,000 |
|
|
|
17,140,000 |
|
|
|
16,191,000 |
|
Boeing 757-232 |
|
N692DL |
|
29724 |
|
September 1998 |
|
|
14,290,000 |
|
|
|
17,386,000 |
|
|
|
17,590,000 |
|
|
|
16,422,000 |
|
Boeing 757-232 |
|
N693DL |
|
29725 |
|
October 1998 |
|
|
13,860,000 |
|
|
|
16,418,000 |
|
|
|
16,910,000 |
|
|
|
15,729,333 |
|
Boeing 757-232 |
|
N694DL |
|
29726 |
|
November 1998 |
|
|
14,000,000 |
|
|
|
16,746,000 |
|
|
|
17,140,000 |
|
|
|
15,962,000 |
|
Boeing 757-232 |
|
N695DL |
|
29727 |
|
December 1998 |
|
|
14,200,000 |
|
|
|
16,810,000 |
|
|
|
17,290,000 |
|
|
|
16,100,000 |
|
Boeing 757-232 |
|
N6714Q |
|
30485 |
|
December 2000 |
|
|
16,580,000 |
|
|
|
18,787,000 |
|
|
|
20,640,000 |
|
|
|
18,669,000 |
|
Boeing 757-232 |
|
N6715C |
|
30486 |
|
February 2001 |
|
|
17,690,000 |
|
|
|
19,093,000 |
|
|
|
20,910,000 |
|
|
|
19,093,000 |
|
Boeing 767-332ER |
|
N169DZ |
|
29689 |
|
June 1998 |
|
|
26,420,000 |
|
|
|
40,192,000 |
|
|
|
30,580,000 |
|
|
|
30,580,000 |
|
S-80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registration |
|
Manufacturers |
|
Month of |
|
|
Appraisers Valuations |
|
|
Appraised |
Aircraft Type |
|
Number |
|
Serial Number |
|
Delivery |
|
|
AISI |
|
|
|
BK |
|
|
|
MBA |
|
|
Value(1) |
Boeing 767-332ER |
|
N171DZ |
|
29690 |
|
September 1998 |
|
|
26,420,000 |
|
|
|
40,874,000 |
|
|
|
31,220,000 |
|
|
|
31,220,000 |
|
Boeing 767-332ER |
|
N172DZ |
|
29691 |
|
September 1998 |
|
|
26,400,000 |
|
|
|
40,878,000 |
|
|
|
31,210,000 |
|
|
|
31,210,000 |
|
Boeing 767-332ER |
|
N173DZ |
|
29692 |
|
November 1998 |
|
|
26,480,000 |
|
|
|
41,519,000 |
|
|
|
31,670,000 |
|
|
|
31,670,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total: |
|
|
|
|
|
|
|
|
$496,670,000 |
|
|
|
$648,377,000 |
|
|
|
$592,580,000 |
|
|
|
$572,370,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The appraised value of each Aircraft set forth above is the lesser of the average and
median appraised values of each such Aircraft. Such appraisals indicate appraised base value,
adjusted for the maintenance of such Aircraft around the time of such appraisals (but
assuming the related engines are in a half-time condition). |
According to the International Society of Transport Aircraft Trading, appraised base
value is defined as each Appraisers opinion of the underlying economic value of an aircraft in an
open, unrestricted, stable market environment with a reasonable balance of supply and demand, and
assumes full consideration of its highest and best use. An aircrafts appraised base value is
founded in the historical trend of values and in the projection of value trends and presumes an
arms-length, cash transaction between willing, able and knowledgeable parties, acting prudently,
with an absence of duress and with a reasonable period of time available for marketing.
Each Appraiser was asked to provide, and each Appraiser furnished, its opinion as to the
appraised value of the Aircraft. The AISI appraisal is dated March 10, 2011; the BK appraisal is
dated March 16, 2011; and the MBA appraisal is dated March 15, 2011. The appraised values provided
by each of AISI, BK and MBA are presented as of or around the respective dates of their appraisals.
The appraisals do not purport to, and do not, reflect the current market value of the Aircraft. The
appraisals are based on various significant assumptions and methodologies which vary among the
Appraisers. The appraisals of the Aircraft indicate appraised base value, adjusted for the
maintenance status of the Aircraft around the time of the appraisals (but assuming the related
engines are in a half-time condition). As part of this process, all three Appraisers performed
desk-top appraisals without any physical inspection of the Aircraft. Appraisals that are more
current or are based on different assumptions and methodologies (or a physical inspection of the
Aircraft) may result in valuations that are materially different from those contained in the
appraisals.
The Appraisers have delivered letters setting forth their respective appraisals, copies of
which are annexed to this prospectus supplement as Appendix II. For a discussion of the assumptions
and methodologies used in each of the appraisals, please refer to such letters. In addition, we
have set forth on Appendix III to this prospectus supplement a summary of the base value,
maintenance adjustment and maintenance adjusted base value determined by each Appraiser with
respect to each Aircraft.
An appraisal is only an estimate of value. It does not necessarily indicate the price at which
an aircraft may be purchased or sold in the market. In particular, the appraisals of the Aircraft
are estimates of the values of the Aircraft assuming the Aircraft are in a certain condition, which
may not be the case. An appraisal should not be relied upon as a measure of realizable value. The
proceeds realized upon the exercise of remedies with respect to any Aircraft, including a sale of
such Aircraft, may be less than its appraised value. The value of an Aircraft if remedies are
exercised under the applicable Indenture will depend on various factors, including market, economic
and airline industry conditions; the supply of similar aircraft; the availability of buyers; the
condition of the Aircraft; the time period in which the Aircraft is sought to be sold; and whether
the Aircraft is sold separately or as part of a block.
As discussed under Risk Factors Relating to the Airline Industry Terrorist attacks or
international hostilities may adversely affect our business, financial condition and operating
results, since September 11, 2001, the airline industry has suffered substantial losses. In
response to adverse market conditions, many U.S. air carriers and lessors have reduced the number
of aircraft in operation, and there may be further reductions, particularly by air carriers in
bankruptcy or liquidation. Any such reduction of aircraft of the same models as the Aircraft could
adversely affect the value of the Aircraft.
S-81
Accordingly, we cannot assure you that the proceeds realized upon any exercise of remedies
with respect to any Aircraft would be sufficient to satisfy in full payments due on the Equipment
Notes relating to such Aircraft or the full amount of distributions expected on the Certificates.
See Risk Factors Risk Factors Relating to the Class B Certificates and the Offering
Appraisals should not be relied upon as a measure of realizable value of the Aircraft.
Deliveries of Aircraft
The Note Purchase Agreement provides that the period for financing the Aircraft under this
offering will expire on the earlier of (a) October 14, 2011 and (b) the date on which Equipment
Notes issued with respect to all of the Aircraft have been purchased by the Trustees in accordance
with the Note Purchase Agreement (the Delivery Period Termination Date).
On and subject to the terms and conditions of the Note Purchase Agreement and the applicable
Participation Agreement and Indenture, Delta agrees to enter into a secured debt financing
agreement with respect to each Aircraft on or prior to October 14, 2011. The Aircraft are
currently subject to liens under Existing Financings. See Use of Proceeds. After the Aircraft are
released from the liens of the Existing Financings, the Aircraft are expected to be subjected to
the liens of the Indentures in connection with this offering.
S-82
DESCRIPTION OF THE EQUIPMENT NOTES
The following summary describes certain material terms of the Equipment Notes. The summary
does not purport to be complete and is qualified in its entirety by reference to all of the
provisions of the Equipment Notes, the form of Indenture, the form of Participation Agreement and
the Note Purchase Agreement, copies of which will be filed as exhibits to a Current Report on Form
8-K to be filed by Delta with the SEC. Except as otherwise indicated, the following summaries
relate to the Equipment Notes, the Indenture and the Participation Agreement applicable to each
Aircraft.
On and subject to the terms and conditions of the Note Purchase Agreement and the applicable
Participation Agreement and Indenture, Delta agrees to enter into a secured debt financing with
respect to: each Aircraft on or prior to October 14, 2011. The Note Purchase Agreement provides for
the relevant parties to enter into a Participation Agreement and an Indenture relating to the
financing of each Aircraft that are substantially in the forms attached to the Note Purchase
Agreement. See Description of the Certificates Obligation to Purchase Equipment Notes. The
description of the terms of the Equipment Notes in this prospectus supplement is based on the forms
of such agreements annexed to the Note Purchase Agreement. However, the terms of the financing
agreements actually entered into with respect to an Aircraft may differ from the forms of such
agreements and, consequently, may differ from the description of such agreements contained in this
prospectus supplement. Although such changes are permitted, under the Note Purchase Agreement,
Delta must obtain written confirmation from each Rating Agency to the effect that the use of
financing agreements modified in any material respect from the forms attached to the Note Purchase
Agreement will not result in a withdrawal, suspension or downgrading of the ratings of each class
of Certificates then rated by such Rating Agency. The terms of such agreements also must in any
event comply with the Required Terms. In addition, Delta, subject to certain exceptions, is
obligated to certify to the Trustees that any substantive modifications do not materially and
adversely affect the Certificateholders or the Liquidity Providers. See Description of the
Certificates Obligation to Purchase Equipment Notes.
General
Equipment Notes will be issued in two series with respect to each Aircraft, the Series A
Equipment Notes and the Series B Equipment Notes (the Series B Equipment Notes, together with
the Series A Equipment Notes, the Equipment Notes). Pursuant to the terms of a participation
agreement among Delta, the Class A Trustee, the Class B Trustee, the Subordination Agent and the
Loan Trustee with respect to each Aircraft (each, a Participation Agreement), the Class A Trust
will purchase from Delta the Series A Equipment Notes, and the Class B Trustee will purchase from
Delta the Series B Equipment Notes, to be issued with respect to each Aircraft. The Equipment Notes
with respect to each Aircraft will be issued under a separate indenture and security agreement
(each, an Indenture) between Delta and U.S. Bank Trust National Association, as loan trustee
thereunder (each, a Loan Trustee). The Equipment Notes will be direct, full recourse obligations
of Delta.
Subordination
The following subordination provisions will be applicable to the Equipment Notes issued under
the Indentures:
|
|
|
the indebtedness evidenced by the Series B Equipment Notes issued under an Indenture
will be, to the extent and in the manner provided in such Indenture, subordinate and
subject in right of payment to the Series A Equipment Notes issued under such Indenture;
and |
|
|
|
|
the indebtedness evidenced by the Series A Equipment Notes and the Series B Equipment
Notes issued under any Indenture will be, to the extent and in the manner provided in the
other
Indentures, subordinate and subject in right of payment under such other Indentures to
Equipment Notes issued under such other Indentures. (Indentures, Section 2.13(a)) |
S-83
By the acceptance of its Equipment Notes of any series issued under any Indenture, each holder
of such series of Equipment Notes (each, a Noteholder) will agree that:
|
|
|
if such Noteholder, in its capacity as a Noteholder under such Indenture, receives any
payment or distribution under such Indenture that it is not entitled to receive under the
provisions of such Indenture, it will hold any amount so received in trust for the Loan
Trustee under such Indenture and forthwith turn over such amount to such Loan Trustee in
the form received to be applied as provided in such Indenture; and |
|
|
|
|
if such Noteholder, in its capacity as a Noteholder under any other Indenture, receives
any payment or distribution in respect of Equipment Notes of any series issued under such
other Indenture that it is not entitled to receive under the provisions of such other
Indenture, it will hold any amount so received in trust for the Loan Trustee under such
other Indenture and forthwith turn over such amount to such Loan Trustee under such other
Indenture in the form received to be applied as provided in such other Indenture.
(Indentures, Section 2.13(c)) |
By acceptance of its Equipment Notes of any series under any Indenture, each Noteholder of
such series will also:
|
|
|
agree to and shall be bound by the subordination provisions in such Indenture; |
|
|
|
|
authorize and direct the Loan Trustees under all Indentures on such Noteholders behalf
to take any action necessary or appropriate to effectuate the subordination as provided in
such Indenture; and |
|
|
|
|
appoint the Loan Trustees under all Indentures as such Noteholders attorney-in-fact
for such purpose. (Indentures, Section 2.13(a)) |
By virtue of the Intercreditor Agreement, all of the Equipment Notes held by the Subordination
Agent will be effectively cross-subordinated. This means that payments received on the Series B
Equipment Notes issued in respect of one Aircraft may be applied in accordance with the priority of
payment provisions set forth in the Intercreditor Agreement to make distributions on the Class A
Certificates. (Intercreditor Agreement, Section 3.02)
During the existence of an Indenture Event of Default, if the Equipment Notes under the
relevant Indenture have become due and payable in full as described in Remedies, then after
payment in full of first, the persons indemnified under Indemnification and certain other
expenses with respect to such Indenture; second, the Series A Equipment Notes under such Indenture;
and third, the Series B Equipment Notes under such Indenture; any excess proceeds will be available
to pay certain indemnity and expense obligations with respect to Equipment Notes issued under other
Indentures and held by the Subordination Agent (Related Equipment Notes) and, after payment in
full of such indemnity and expense obligations, to pay any shortfalls then due in respect of
Related Equipment Notes under which either (i) a default of the type described in the first clause
under Indenture Events of Default, Notice and Waiver has occurred and is continuing, whether or
not the applicable grace period has expired, or (ii) an Indenture Event of Default not described in
the preceding clause (i) has occurred and is continuing and either (x) the Equipment Notes under
the relevant Indenture have become due and payable and the acceleration has not been rescinded or
(y) the relevant Loan Trustee has notified Delta that it intends to exercise remedies under such
Indenture (see Remedies) (each such Indenture, a Defaulted Operative Indenture) in the
following order of prioritySeries A Equipment Notes and Series B Equipment Notesratably as to
each such series; and in the absence of any
such shortfall, such excess proceeds, if any, will be held by the relevant Loan Trustee as
additional collateral for such Related Equipment Notes (see Security). (Indentures, Section
3.03)
S-84
Principal and Interest Payments
Subject to the provisions of the Intercreditor Agreement, interest paid on the Equipment Notes
held in each Trust will be passed through to the Certificateholders of such Trust on the dates and
at the rate per annum applicable to the Certificates issued by such Trust until the final expected
Regular Distribution Date for such Trust. Subject to the provisions of the Intercreditor Agreement,
principal paid on the Equipment Notes held in each Trust will be passed through to the
Certificateholders of such Trust in scheduled amounts on the dates set forth herein until the final
expected Regular Distribution Date for such Trust.
Interest will be payable on the unpaid principal amount of each issued and outstanding
Equipment Note at the rate applicable to such Equipment Note on April 15 and October 15, commencing
on October 15, 2011. Interest on the Equipment Notes will be computed on the basis of a 360-day
year of twelve 30-day months. Overdue amounts of principal and (to the extent permitted by
applicable law) Make-Whole Amount, if any, interest and any other amounts payable under each series
of Equipment Notes will bear interest, payable on demand, at the interest rate that is the lesser
of (i) the interest applicable to such series of Equipment Notes plus 1% and (ii) the maximum rate
permitted by applicable law. (Indentures, Section 2.01)
The entire principal amount of the issued and outstanding Series B Equipment Notes is
scheduled to be paid on October 15, 2014, and scheduled principal payments on the issued and
outstanding Series A Equipment Notes will be paid on April 15 and October 15 in certain years,
commencing on April 15, 2012 and ending on April 15, 2019 (each such maturity date for a series of
Equipment Notes, the Final Maturity Date with respect to such series of Equipment Notes). See
Description of the Certificates Pool Factors for a discussion of the Scheduled Payments of
principal of the Equipment Notes and possible revisions thereto.
If any date scheduled for a payment of principal, Make-Whole Amount (if any) or interest with
respect to the Equipment Notes is not a Business Day, such payment will be made on the next
succeeding Business Day and interest will not be added for such additional period.
Redemption
If an Event of Loss occurs with respect to an Aircraft under any Indenture and such Aircraft
is not replaced by Delta under such Indenture, the Equipment Notes issued with respect to such
Aircraft will be redeemed, in whole, in each case at a price equal to 100% of the unpaid principal
thereof, together with all accrued and unpaid interest thereon to (but excluding) the date of
redemption, but without any premium, and all other obligations owed or then due and payable to
holders of the Equipment Notes issued under such Indenture. (Indentures, Section 2.10)
All of the Equipment Notes issued with respect to an Aircraft may be redeemed prior to
maturity at any time, at the option of Delta; provided that all outstanding Equipment Notes issued
with respect to all other Aircraft are simultaneously redeemed. In addition, Delta may elect to
redeem the Series B Equipment Notes with respect to all Aircraft either in connection with a
refinancing of such series or without any such refinancing. See Possible Refinancing of Class B
Certificates. The redemption price in the case of any optional redemption of Equipment Notes under
any Indenture will be equal to 100% of the unpaid principal thereof, together with all accrued and
unpaid interest thereon to (but excluding) the date of redemption and all other obligations owed or
then due and payable to holders of the Equipment Notes issued under such Indenture, plus a
Make-Whole Amount (if any). (Indentures, Section 2.11)
Notice of any such redemption will be given by the Loan Trustee to each holder of the
Equipment Notes to be redeemed not less than 30 nor more than 60 days prior to the applicable
redemption date. A
notice of redemption may be revoked by written notice from Delta to the Loan Trustee given no
later than three days prior to the redemption date. (Indentures, Section 2.12)
S-85
Make-Whole Amount means with respect to any Equipment Note, the amount (as determined by an
independent investment banker selected by Delta (and, following the occurrence and during the
continuance of an Indenture Event of Default, reasonably acceptable to the Loan Trustee)), if any,
by which (i) the present value of the remaining scheduled payments of principal and interest from
the redemption date to maturity of such Equipment Note computed by discounting each such payment on
a semiannual basis from its respective payment date (assuming a 360 day year of twelve 30 day
months) using a discount rate equal to the Treasury Yield plus 0.50% in the case of Series A
Equipment Notes, and 0.50% in the case of Series B Equipment Notes (each such percentage, a
Make-Whole Spread), exceeds (ii) the outstanding principal amount of such Equipment Note plus
accrued but unpaid interest thereon to the date of redemption. (Indentures, Annex A)
For purposes of determining the Make-Whole Amount, Treasury Yield means, at the date of
determination, the interest rate (expressed as a semiannual equivalent and as a decimal rounded to
the number of decimal places as appears in the interest rate applicable to the relevant Equipment
Note and, in the case of United States Treasury bills, converted to a bond equivalent yield)
determined to be the per annum rate equal to the semiannual yield to maturity for United States
Treasury securities maturing on the Average Life Date and trading in the public securities market
either as determined by interpolation between the most recent weekly average constant maturity,
non-inflation-indexed series yield to maturity for two series of United States Treasury securities,
trading in the public securities markets, (A) one maturing as close as possible to, but earlier
than, the Average Life Date and (B) the other maturing as close as possible to, but later than, the
Average Life Date, in each case as reported in the most recent H.15(519) or, if a weekly average
constant maturity, non-inflation-indexed series yield to maturity for United States Treasury
securities maturing on the Average Life Date is reported in the most recent H.15(519), such weekly
average yield to maturity as reported in such H.15(519). H.15(519) means the weekly statistical
release designated as such, or any successor publication, published by the Board of Governors of
the Federal Reserve System. The date of determination of a Make-Whole Amount shall be the third
Business Day prior to the applicable redemption date and the most recent H.15(519) means the
latest H.15(519) published prior to the close of business on the third Business Day prior to the
applicable redemption date. (Indentures, Annex A)
Average Life Date for each Equipment Note to be redeemed shall be the date which follows the
redemption date by a period equal to the Remaining Weighted Average Life at the redemption date of
such Equipment Note. Remaining Weighted Average Life of an Equipment Note, at the redemption date
of such Equipment Note, shall be the number of days equal to the quotient obtained by dividing: (i)
the sum of the products obtained by multiplying (A) the amount of each then remaining installment
of principal, including the payment due on the maturity date of such Equipment Note, by (B) the
number of days from and including the redemption date to but excluding the scheduled payment date
of such principal installment by (ii) the then unpaid principal amount of such Equipment Note.
(Indentures, Annex A)
Security
Aircraft
The Equipment Notes issued under any Indenture will be secured by a security interest in,
among other things, the Aircraft subject to the lien of such Indenture and each Aircraft subject to
the liens of the other Indentures, as well as an assignment for security purposes to the Loan
Trustee of certain of Deltas warranty rights under certain of its purchase agreements with the
aircraft manufacturer. (Indentures, Granting Clause)
Since the Equipment Notes are so cross-collateralized, any proceeds from the sale of any
Aircraft by the Loan Trustee or other exercise of remedies under the related Indenture following an
Indenture Event of Default under such Indenture will (after all of the Equipment Notes issued under
such Indenture have been
paid off, and subject to the provisions of the Bankruptcy Code) be available for application
to shortfalls with respect to the Equipment Notes issued under the other Indentures and the other
obligations secured by the other Indentures that are due at the time of such application, as
described under Subordination above. In the absence of any such shortfall at the time of
such application, excess proceeds will be held by
S-86
the Loan Trustee under such Indenture as
additional collateral for the Equipment Notes issued under each of the other Indentures and will be
applied to the payments in respect of the Equipment Notes issued under such other Indentures as
they come due. However, if any Equipment Note ceases to be held by the Subordination Agent (as a
result of sale during the exercise of remedies by the Controlling Party or otherwise), such
Equipment Note will cease to be entitled to the benefits of cross-collateralization. (Indentures,
Section 3.03) Any cash Collateral held as a result of the cross-collateralization of the Equipment
Notes would not be entitled to the benefits of Section 1110.
If the Equipment Notes issued under any Indenture are repaid in full in the case of an Event
of Loss with respect to the applicable Aircraft, the lien on such Aircraft under such Indenture
will be released. (Indentures, Section 7.05) Once the lien on any Aircraft is released, such
Aircraft will no longer secure the amounts that may be owing under any Indenture.
Cash
Cash, if any, held from time to time by the Loan Trustee with respect to any Aircraft,
including funds held as the result of an Event of Loss to such Aircraft, will be invested and
reinvested by such Loan Trustee, at the direction of Delta, in investments described in the related
Indenture. (Indentures, Section 5.06) Such investments would not be entitled to the benefits of
Section 1110.
Loan to Value Ratios of Equipment Notes
The tables in Appendix IV to this prospectus supplement set forth the loan to Aircraft value
ratios (LTVs) for the Series A Equipment Notes and the Series B Equipment Notes issued in respect
of each Aircraft, assuming such Aircraft has been subjected to an Indenture and that the Trusts
have purchased such Equipment Notes as of October 15, 2011 (the first Regular Distribution Date
that occurs after the Class B Issuance Date) and each Regular Distribution Date thereafter.
The LTVs for each Regular Distribution Date listed in the tables in Appendix IV were obtained
by dividing (i) the outstanding principal amount (assuming no payment default, purchase or early
redemption) of such Equipment Notes, plus in the case of the Series B Equipment Notes, the
outstanding balance of the Series A Equipment Notes assumed to be issued and outstanding under the
relevant Indenture, determined immediately after giving effect to the payments scheduled to be made
on each such Regular Distribution Date by (ii) the assumed aircraft value (the Assumed Aircraft
Value) on such Regular Distribution Date, calculated based on the Depreciation Assumption, of the
Aircraft with respect to which such Equipment Notes were assumed to be issued and outstanding.
The tables in Appendix IV are based on the assumption (the Depreciation Assumption) that the
Assumed Aircraft Value of each Aircraft depreciates annually by approximately 3% of the appraised
value at delivery per year for the first 15 years after delivery of such Aircraft by the
manufacturer, by approximately 4% per year thereafter for the next five years and by approximately
5% per year for each year after that. With respect to each Aircraft, the appraised value
at delivery of such Aircraft is the theoretical value that, when depreciated from the initial
delivery of such Aircraft by the manufacturer in accordance with the Depreciation Assumption,
results in the appraised value of such Aircraft specified under Prospectus Supplement Summary
Equipment Notes and the Aircraft and Description of the Aircraft and the Appraisals The
Appraisals.
Other rates or methods of depreciation could result in materially different LTVs, and no
assurance can be given (i) that the depreciation rate and method assumed for the purposes of the
tables are the ones most likely to occur or (ii) as to the actual future value of any Aircraft.
Thus, the tables should not be considered a forecast or prediction of expected or likely LTVs, but
simply a mathematical calculation based on one set
of assumptions. See Risk Factors Risk Factors Relating to the Class B Certificates and the
Offering Appraisals should not be relied upon as a measure of realizable value of the
Aircraft.
S-87
Limitation of Liability
Except as otherwise provided in the Indentures, no Loan Trustee, in its individual capacity,
will be answerable or accountable under the Indentures or the Equipment Notes under any
circumstances except, among other things, for its own willful misconduct or negligence.
(Indentures, Section 6.01)
Indenture Events of Default, Notice and Waiver
Indenture Events of Default under each Indenture will include:
|
|
|
the failure by Delta to pay any interest, principal or Make-Whole Amount (if any)
within 15 days after the same has become due on any Equipment Note; |
|
|
|
|
the failure by Delta to pay any amount (other than interest, principal or Make-Whole
Amount (if any)) when due under the Indenture, any Equipment Note or any other related
operative document for more than 30 days after Delta receives written notice from the Loan
Trustee or any Noteholder under such Indenture; |
|
|
|
|
the failure by Delta to carry and maintain (or cause to be maintained) insurance or
indemnity on or with respect to the Aircraft in accordance with the provisions of such
Indenture; provided that no such failure to carry and maintain insurance will constitute
an Indenture Event of Default until the earlier of (i) the date such failure has continued
unremedied for a period of 30 days after the Loan Trustee receives notice of the
cancellation of such insurance or (ii) the date such insurance is not in effect as to the
Loan Trustee; |
|
|
|
|
the failure by Delta to perform or observe any other covenant, condition or agreement
to be performed or observed by it under any related operative document that continues for
a period of 60 days after Delta receives written notice from the Loan Trustee or any
Noteholder under such Indenture; provided that, if such failure is capable of being
remedied, no such failure will constitute an Indenture Event of Default for a period of
one year after such notice is received by Delta so long as Delta is diligently proceeding
to remedy such failure; |
|
|
|
|
any representation or warranty made by Delta in the related operative documents proves
to have been incorrect in any material respect when made, and such incorrectness continues
to be material to the transactions contemplated by the Indenture and remains unremedied
for a period of 60 days after Delta receives written notice from the Loan Trustee under
such Indenture; provided that, if such incorrectness is capable of being remedied, no such
incorrectness will constitute an Indenture Event of Default for a period of one year after
such notice is received by Delta so long as Delta is diligently proceeding to remedy such
incorrectness; |
|
|
|
|
the occurrence of certain events of bankruptcy, reorganization or insolvency of Delta;
or |
|
|
|
|
the occurrence and continuance of an Indenture Event of Default under any other
Indenture, but only if, as of any date of determination, all Equipment Notes issued and
outstanding under such other Indenture are held by the Subordination Agent under the
Intercreditor Agreement. (Indenture, Section 4.01) |
Each Indenture provides that the holders of a majority in aggregate unpaid principal amount of
the Equipment Notes outstanding under such Indenture, by written instruction to the Loan Trustee,
may on behalf of all of the Noteholders waive any past default and its consequences under such
Indenture, except a default in the payment of the principal of, Make-Whole Amount (if any) or
interest due under any such
Equipment Notes outstanding (other than with the consent of the holder thereof) or a default
in respect of any covenant or provision of such Indenture that cannot be modified or amended
without the consent of each such affected Noteholder. (Indentures, Section 4.05) This provision,
among others, is subject to the terms of the Intercreditor Agreement.
S-88
Remedies
The exercise of remedies under the Indentures will be subject to the terms of the
Intercreditor Agreement, and the following description should be read in conjunction with the
description of the Intercreditor Agreement.
If an Indenture Event of Default occurs and is continuing under an Indenture, the related Loan
Trustee may, and upon receipt of written instructions of the holders of a majority in principal
amount of the Equipment Notes then outstanding under such Indenture will, declare the principal of
all such Equipment Notes issued thereunder immediately due and payable, together with all accrued
but unpaid interest thereon (but without any Make-Whole Amount). If certain events of bankruptcy or
insolvency occur with respect to Delta, such amounts shall, subject to applicable law, become due
and payable without any declaration or other act on the part of the related Loan Trustee or holders
of Equipment Notes. The holders of a majority in principal amount of Equipment Notes outstanding
under an Indenture may rescind any declaration of acceleration of such Equipment Notes if (i) there
has been paid to or deposited with the related Loan Trustee an amount sufficient to pay all overdue
installments of principal and interest on any such Equipment Notes, and all other amounts owing
under the operative documents, that have become due otherwise than by such declaration of
acceleration and (ii) all other Indenture Events of Default, other than nonpayment of principal
amount or interest on the Equipment Notes that have become due solely because of such acceleration,
have been cured or waived; provided that no such rescission or annulment will extend to or affect
any subsequent default or Indenture Event of Default or impair any right consequent thereon.
(Indentures, Section 4.02(d))
Each Indenture provides that, if an Indenture Event of Default under such Indenture has
occurred and is continuing, the related Loan Trustee may exercise certain rights or remedies
available to it under such Indenture or under applicable law. Such remedies include the right to
take possession of the Aircraft and to sell all or any part of the Airframe or any Engine
comprising the Aircraft subject to such Indenture. (Indentures, Section 4.02(a)) See Description
of the Intercreditor Agreement Intercreditor Rights Limitation on Exercise of Remedies.
In the case of Chapter 11 bankruptcy proceedings in which an air carrier is a debtor, Section
1110 provides special rights to holders of security interests with respect to equipment (as
defined in Section 1110). Section 1110 provides that, subject to the limitations specified therein,
the right of a secured party with a security interest in equipment to take possession of such
equipment in compliance with the provisions of a security agreement and to enforce any of its
rights or remedies thereunder is not affected after 60 days after the date of the order for relief
in a case under Chapter 11 of the Bankruptcy Code by any provision of the Bankruptcy Code. Section
1110, however, provides that the right to take possession of an aircraft and enforce other remedies
may not be exercised for 60 days following the date of the order for relief (or such longer period
consented to by the holder of a security interest and approved by the court) and may not be
exercised at all after such period if the trustee in reorganization agrees, subject to the approval
of the court, to perform the debtors obligations under the security agreement and cures all
defaults (other than a default of a kind specified in Section 365(b)(2) of the Bankruptcy Code,
such as a default that is a breach of a provision relating to the financial condition, bankruptcy
or insolvency of the debtor). Equipment is defined in Section 1110, in part, as an aircraft,
aircraft engine, propeller, appliance, or spare part (as defined in section 40102 of title 49 of
the United States Code) that is subject to a security interest granted by, leased to, or
conditionally sold to a debtor that, at the time such transaction is entered into, holds an air
carrier operating certificate issued pursuant to chapter 447 of title 49 of the United States Code
for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo.
It is a condition to each Trustees obligations to purchase Equipment Notes with respect to
each Aircraft that Deltas internal counsel provide an opinion to the Trustees that, if Delta were
to become a
debtor under Chapter 11 of the Bankruptcy Code, the Loan Trustee would be entitled to the
benefits of Section 1110 with respect to the Airframe and Engines comprising the Aircraft
originally subjected to the lien of the relevant Indenture. This opinion will be subject to certain
qualifications and assumptions.
S-89
The opinion of Deltas internal counsel will not address the possible replacement of an
Aircraft after an Event of Loss in the future, the consummation of which is conditioned upon the
contemporaneous delivery of an opinion of counsel to the effect that the related Loan Trustee will
be entitled to Section 1110 benefits with respect to the replacement Airframe unless there is a
change in law or court interpretation that results in Section 1110 not being available. See
Certain Provisions of the Indentures Events of Loss. The opinion of Deltas internal counsel
also will not address the availability of Section 1110 with respect to the bankruptcy proceedings
of any possible lessee of an Aircraft if it is leased by Delta.
In certain circumstances following the bankruptcy or insolvency of Delta where the obligations
of Delta under any Indenture exceed the value of the Aircraft Collateral under such Indenture,
post-petition interest will not accrue on the related Equipment Notes. In addition, to the extent
that distributions are made to any Certificateholders, whether under the Intercreditor Agreement or
from drawings on any Liquidity Facilities, in respect of amounts that would have been funded by
post-petition interest payments on such Equipment Notes had such payments been made, there would be
a shortfall between the claim allowable against Delta on such Equipment Notes after the disposition
of the Aircraft Collateral securing such Equipment Notes and the remaining balance of the
Certificates. Such shortfall would first reduce some or all of the remaining claim against Delta
available to the Class B Trustee for the Class B Certificates.
If an Indenture Event of Default under any Indenture occurs and is continuing, any sums held
or received by the related Loan Trustee may be applied to reimburse such Loan Trustee for any tax,
expense or other loss incurred by it and to pay any other amounts due to such Loan Trustee prior to
any payments to holders of the Equipment Notes issued under such Indenture. (Indentures, Section
3.03)
Modification of Indentures
Without the consent of holders of a majority in principal amount of the Equipment Notes
outstanding under any Indenture, the provisions of such Indenture and the related Equipment Notes
and Participation Agreement may not be amended or modified, except to the extent indicated below.
In addition, any Indenture and any Equipment Notes may be amended without the consent of any
Noteholder or any other beneficiaries of the security under such Indenture to, among other things,
(i) evidence the succession of another person to Delta and the assumption by any such successor of
the covenants of Delta contained in such Indenture and any of the operative documents; (ii) cure
any defect or inconsistency in such Indenture or the Equipment Notes issued thereunder, or make any
change not inconsistent with the provisions of such Indenture (provided that such change does not
adversely affect the interests of any Noteholder or any other beneficiary of the security under
such Indenture in its capacity solely as Noteholder or other beneficiary of the security under such
Indenture, as the case may be); (iii) cure any ambiguity or correct any mistake; (iv) evidence the
succession of a new trustee or the removal of a trustee, or facilitate the appointment of an
additional or separate trustee pursuant to such Indenture; (v) convey, transfer, assign, mortgage
or pledge any property to or with the Loan Trustee of such Indenture; (vi) make any other
provisions or amendments with respect to matters or questions arising under such Indenture or such
Equipment Notes or to amend, modify or supplement any provision thereof, provided that such action
does not adversely affect the interests of any Noteholder or any other beneficiary of the security
under such Indenture in its capacity solely as Noteholder or other beneficiary of the security
under such Indenture, as the case may be; (vii) correct, supplement or amplify the description of
any property at any time subject to the lien of such Indenture or assure, convey and confirm unto
the Loan Trustee any property subject or required to be subject to the lien of such Indenture, or
subject to the lien of such Indenture the applicable Airframe or Engines or any replacement
Airframe or replacement Engine; (viii) add to the covenants of Delta for the benefit of the
Noteholders or any other beneficiary of the security under such Indenture or surrender any rights
or powers conferred upon Delta under such Indenture; (ix) add to rights of the Noteholders or any
other beneficiary of the security under such Indenture; (x) include on the Equipment
Notes under such Indenture any legend as may be required by law or as may otherwise be
necessary or advisable; (xi) comply with any applicable requirements of the Trust Indenture Act or
any other requirements of applicable law or of any regulatory body; (xii) give effect to the
replacement of any Liquidity Provider with a replacement liquidity provider and the replacement of
any Liquidity Facility with
S-90
a Replacement Facility and, if a Replacement Facility is to be
comprised of more than one instrument, incorporate appropriate mechanics for multiple liquidity
facilities for the applicable Trust; (xiii) give effect to the replacement of the Depositary with a
Replacement Depositary and the agreements related thereto; (xiv) evidence the succession of a new
escrow agent or a new paying agent under the Escrow Agreements pursuant thereto or the removal of
the Escrow Agent or the Paying Agent thereunder; or (xv) provide for the successive redemption of
Series B Equipment Notes and issuance from time to time of new Series B Equipment Notes and for the
issuance of pass through certificates by any pass through trust that acquires any such new Series B
Equipment Notes and make changes relating to any of the foregoing (including, without limitation,
provide for any prefunding mechanism in connection therewith) and provide for any credit support
for any pass through certificates relating to such Series B Equipment Notes (including, without
limitation, to secure claims for fees, interest, expenses, reimbursement of advances and other
obligations arising from such credit support (including, without limitation, to specify such credit
support as a Liquidity Facility and the provider of any such credit support as a Liquidity
Provider, and if such Liquidity Facility is to be comprised of more than one instrument, to
incorporate appropriate mechanics for multiple liquidity facilities for a single pass through
trust)). (Indentures, Section 9.01) See Possible Refinancing of Class B Certificates.
Each Indenture provides that without the consent of the holder of each Equipment Note
outstanding under such Indenture affected thereby, no amendment or modification of such Indenture
may, among other things, (i) reduce the principal amount of, Make-Whole Amount (if any) or interest
payable on any Equipment Notes issued under such Indenture; (ii) change the date on which any
principal amount of, Make-Whole Amount (if any) or interest payable on any Equipment Note is due or
payable; (iii) create any lien with respect to the Collateral subject to the lien of such Indenture
prior to or pari passu with the lien of such Indenture, except as permitted by such Indenture, or
deprive any holder of an Equipment Note issued under such Indenture of the benefit of the lien of
such Indenture upon the related Collateral, except as provided in connection with the exercise of
remedies under such Indenture, provided that, without the consent of each holder of an affected
Related Equipment Note then outstanding, no such amendment, waiver or modification of terms of, or
consent under, any thereof shall modify the provisions described in the last paragraph under
Subordination or this clause (iii) or deprive any holder of a Related Equipment Note of the
benefit of the lien of such Indenture upon the related Collateral, except as provided in connection
with the exercise of remedies under such Indenture; or (iv) reduce the percentage in principal
amount of outstanding Equipment Notes issued under such Indenture required to take or approve any
action under such Indenture. (Indentures, Section 9.02(a))
Indemnification
Delta will indemnify each Loan Trustee, the Liquidity Providers, the Subordination Agent, the
Escrow Agent, the Paying Agent and each Trustee, but not, in any case, the holders of Certificates,
for certain losses, claims and other matters. (Participation Agreements, Section 4.02) No Loan
Trustee will be indemnified, however, for actions arising from its negligence or willful
misconduct, or for the inaccuracy of any representation or warranty made in its individual capacity
under an Indenture.
No Loan Trustee will be required to take any action or refrain from taking any action (other
than notifying the Noteholders if it knows of an Indenture Event of Default or of a default arising
from Deltas failure to pay when due principal, interest or Make-Whole Amount (if any) under any
Equipment Note) unless it has received indemnification satisfactory to it against any risks
incurred in connection therewith. (Indentures, Section 5.03)
Certain Provisions of the Indentures
Maintenance and Operation
Under the terms of each Indenture, Delta will be obligated, among other things and at its
expense, to keep each Aircraft duly registered, and to maintain, service, repair, and overhaul the
Aircraft (or cause the same to be done) so as to keep it in such condition as necessary to maintain
the airworthiness certificate for the Aircraft in good standing at all times (other than during
temporary periods of storage, maintenance,
S-91
testing or modification or during periods of grounding
by applicable governmental authorities). (Indentures, Section 7.02(c) and (e))
Delta will agree not to maintain, use, or operate any Aircraft in violation of any law, rule
or regulation of any government having jurisdiction over such Aircraft, or in violation of any
airworthiness certificate, license or registration relating to such Aircraft issued by such
government, except, among other things, to the extent Delta (or any lessee) is contesting in good
faith the validity or application of any such law, rule or regulation in any manner that does not
involve any material risk of sale, forfeiture or loss of the Aircraft or impair the lien of the
related Indenture. (Indentures, Section 7.02(b))
Delta must make (or cause to be made) all alterations, modifications, and additions to each
Airframe and Engine necessary to meet the applicable requirements of the FAA or any other
applicable governmental authority of another jurisdiction in which the Aircraft may then be
registered; provided that Delta (or any lessee) may in good faith contest the validity or
application of any such requirement in any manner that does not involve, among other things, a
material risk of sale, loss or forfeiture of the Aircraft and does not materially adversely affect
the Loan Trustees interest in the Aircraft under (and as defined in) the related Indenture. Delta
(or any lessee) may add further parts and make other alterations, modifications, and additions to
any Airframe or any Engine as Delta (or any such lessee) deems desirable in the proper conduct of
its business, including without limitation removal (without replacement) of parts, so long as such
alterations, modifications, additions, or removals do not materially diminish the value or utility
of such Airframe or Engine below its value or utility immediately prior to such alteration,
modification, addition, or removal (assuming such Airframe or Engine was maintained in accordance
with the related Indenture), except that the value (but not the utility) of any Airframe or Engine
may be reduced from time to time by the value of any such parts which have been removed that Delta
deems obsolete or no longer suitable or appropriate for use on such Airframe or Engine. All parts
(with certain exceptions) incorporated or installed in or added to such Airframe or Engine as a
result of such alterations, modifications or additions will be subject to the lien of the related
Indenture. Delta (or any lessee) is permitted to remove (without replacement) any part that (i) is
in addition to, and not in replacement of or substitution for, any part originally incorporated or
installed in or attached to an Airframe or Engine at the time of delivery thereof to Delta or any
part in replacement of or substitution for such part, (ii) is not required to be incorporated or
installed in or attached to any Airframe or Engine pursuant to applicable requirements of the FAA
or other jurisdiction in which the Aircraft may then be registered, and (iii) can be removed
without materially diminishing the value or utility required to be maintained by the terms of the
related Indenture that the Aircraft would have had if such part had never been installed.
(Indentures, Section 7.04(c))
Except as set forth above, or in certain cases of Event of Loss, Delta will be obligated to
replace or cause to be replaced all parts that are incorporated or installed in or attached to any
Airframe or any Engine and become worn out, lost, stolen, destroyed, seized, confiscated, damaged
beyond repair or permanently rendered unfit for use. Any such replacement parts will become subject
to the lien of the related Indenture in lieu of the part replaced. (Indentures, Section 7.04(a))
Registration, Leasing and Possession
Although Delta has certain re-registration rights, as described below, Delta generally is
required to keep each Aircraft duly registered under the Transportation Code with the FAA and to
record each Indenture under the Federal Aviation Act. (Indentures, Section 7.02(e)) In addition,
Delta will register the international interests created pursuant to the Indentures under the Cape
Town Convention on International Interests in Mobile Equipment and the related Aircraft Equipment
Protocol (the Cape Town
Treaty). (Indentures, Section 7.02(e)). Although Delta has no current intention to do so,
Delta will be permitted to register an Aircraft in certain jurisdictions outside the United States,
subject to certain conditions specified in the related Indenture. These conditions include a
requirement that the laws of the new jurisdiction of registration will give effect to the lien of
and the security interest created by the related Indenture in the applicable Aircraft. (Indentures,
Section 7.02(e)) Delta also will be permitted, subject to certain limitations, to lease any
Aircraft or any Engine to any United States certificated air carrier, to certain foreign air
carriers or to certain manufacturers of airframes or engines (either directly or through an
affiliate). In addition, subject to certain limitations, Delta will be permitted to transfer
possession of any
S-92
Airframe or any Engine other than by lease, including transfers of possession by
Delta or any lessee in connection with certain interchange and pooling arrangements, wet leases,
transfers in connection with maintenance or modifications and transfers to the government of the
United States, Canada, France, Germany, Japan, the Netherlands, Sweden, Switzerland and the United
Kingdom or any instrumentality or agency thereof. (Indentures, Section 7.02(a)) There will be no
general geographical restrictions on Deltas (or any lessees) ability to operate the Aircraft. The
extent to which the relevant Loan Trustees lien would be recognized in an Aircraft if such
Aircraft were located in certain countries is uncertain. Permitted foreign air carrier lessees are
not limited to those based in a country that is a party to the Convention on the International
Recognition of Rights in Aircraft (Geneva 1948) (the Mortgage Convention) or a party to the Cape
Town Treaty. It is uncertain to what extent the relevant Loan Trustees security interest would be
recognized if an Aircraft is registered or located in a jurisdiction not a party to the Mortgage
Convention or the Cape Town Treaty. The Cape Town Treaty provides, that, subject to certain
exceptions, a registered international interest has priority over a subsequently registered
interest and over an unregistered interest for purposes of the law of those jurisdictions that have
ratified the Cape Town Treaty. There are many jurisdictions in the world that have not ratified the
Cape Town Treaty, and the Aircraft may be located in any such jurisdiction from time to time. There
is no legal precedent with respect to the application of the Cape Town Treaty in any jurisdiction
and therefore it is unclear how the Cape Town Treaty will be applied.
In addition, any exercise of the right to repossess an Aircraft may be difficult, expensive
and time-consuming, particularly when such Aircraft is located outside the United States or has
been registered in a foreign jurisdiction or leased to or in possession of a foreign or domestic
operator. Any such exercise would be subject to the limitations and requirements of applicable law,
including the need to obtain consents or approvals for deregistration or re-export of the Aircraft,
which may be subject to delays and political risk. When a defaulting lessee or other permitted
transferee is the subject of a bankruptcy, insolvency, or similar event such as protective
administration, additional limitations may apply. See Risk Factors Risk Factors Relating to the
Class B Certificates and the Offering Repossession of Aircraft may be difficult, time-consuming
and expensive.
In addition, some jurisdictions may allow for other liens or other third party rights to have
priority over a Loan Trustees security interest in an Aircraft. As a result, the benefits of the
related Loan Trustees security interest in an Aircraft may be less than they would be if the
Aircraft were located or registered in the United States.
Upon repossession of an Aircraft, the Aircraft may need to be stored and insured. The costs of
storage and insurance can be significant, and the incurrence of such costs could reduce the
proceeds available to repay the Certificateholders. In addition, at the time of foreclosing on the
lien on an Aircraft under the related Indenture, the Airframe subject to such Indenture might not
be equipped with the Engines subject to the same Indenture. If Delta fails to transfer title to
engines not owned by Delta that are attached to a repossessed Airframe, it could be difficult,
expensive and time-consuming to assemble an Aircraft consisting of an Airframe and Engines subject
to the same Indenture.
Liens
Delta is required to maintain each Aircraft free of any liens, other than the lien of the
Indenture, any other rights existing pursuant to or permitted by the other operative documents and
pass through documents related thereto, the rights of others in possession of the Aircraft in
accordance with the terms of the related Indenture and liens attributable to other parties to the
operative documents and pass through documents
related thereto and other than certain other specified liens, including but not limited to (i)
liens for taxes either not yet overdue or being contested in good faith by appropriate proceedings
so long as such proceedings do not involve any material risk of the sale, forfeiture or loss of the
Airframe or any Engine or the Loan Trustees interest therein or impair the lien of the related
Indenture; (ii) materialmens, mechanics, workers, landlords, repairmens, employees or other
similar liens arising in the ordinary course of business and securing obligations that either are
not yet overdue for more than 60 days or are being contested in good faith by appropriate
proceedings so long as such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Airframe or any Engine or the Loan Trustees interest therein or materially impair the
lien of the related Indenture; (iii) judgment liens so long as such judgment
S-93
is discharged, vacated
or reversed within 60 days or the execution of such judgment is stayed pending appeal or such
judgment is discharged, vacated or reversed within 60 days after expiration of such stay; (iv)
salvage or similar rights of insurers under insurance policies maintained by Delta; (v) any other
lien as to which Delta has provided a bond, cash collateral or other security adequate in the
reasonable opinion of the relevant Loan Trustee; and (vi) liens approved in writing by the Loan
Trustee with the consent of holders of a majority in principal amount of the Equipment Notes
outstanding under the Indenture. (Indentures, Section 7.01)
Insurance
Subject to certain exceptions, Delta is required to maintain or cause to be maintained, at its
or any lessees expense, all risk aircraft hull insurance covering each Aircraft (including,
without limitation, war risk hull insurance if and to the extent the same is maintained by Delta
(or any permitted lessee) with respect to other similar aircraft operated by Delta (or such
permitted lessee) on the same routes), at all times in an amount not less than 110% of the
aggregate outstanding principal amount of the Equipment Notes relating to such Aircraft. However,
after giving effect to self-insurance permitted as described below, the amount payable under such
insurance may be less than such amounts payable with respect to such Equipment Notes. If an
Aircraft suffers an Event of Loss, insurance proceeds up to an amount equal to the outstanding
principal amount of the Equipment Notes, together with accrued but unpaid interest thereon, plus an
amount equal to the interest that will accrue on the outstanding principal amount of the Equipment
Notes during the period commencing on the day following the date of payment of such insurance
proceeds to the Loan Trustee and ending on the loss payment date (the sum of those amounts being,
the Loan Amount) will be paid to the applicable Loan Trustee. If an Aircraft or Engine suffers
loss or damage not constituting an Event of Loss but involving insurance proceeds in excess of
$8,000,000 (in the case of a Boeing 737-832), $12,000,000 (in the case of a Boeing 757-232) or
$15,000,000 (in the case of a Boeing 767-332ER), proceeds in excess of such specified amounts up to
the Loan Amount will be payable to the applicable Loan Trustee, and the proceeds up to such
specified amounts and proceeds in excess of the Loan Amount will be payable directly to Delta
unless an Indenture Event of Default exists, in which event all insurance proceeds for any loss or
damage to an Aircraft (or Engine) up to an amount equal to the Loan Amount will be payable to the
Loan Trustee. So long as the loss does not constitute an Event of Loss, insurance proceeds will be
applied to repair or replace the equipment. (Indentures, Section 7.06(c) and (f))
In addition, subject to certain exceptions, Delta is obligated to maintain or cause to be
maintained aircraft liability insurance at its or any lessees expense, including, without
limitation, passenger, contractual, bodily injury, personal injury and property damage liability
insurance (exclusive of manufacturers product liability insurance and war risk, hijacking and
related perils insurance) with respect to each Aircraft. Such liability insurance must be
underwritten by insurers of recognized responsibility. The amount of such liability insurance
coverage may not be less than the amount of aircraft liability insurance from time to time
applicable to similar aircraft in Deltas fleet on which Delta carries insurance and operated by
Delta on the same or similar routes on which the Aircraft is operated. (Indentures, Section
7.06(a))
Delta is also required to maintain or cause to be maintained war risk, hijacking and related
perils liability insurance with respect to each Aircraft if such Aircraft, the related Airframe or
any related Engine is being operated in any war zone or area of recognized or, in Deltas judgment,
threatened hostilities, (i) in an amount that is not less than the aircraft liability insurance
applicable to similar aircraft and engines in
Deltas fleet on which Delta carries insurance and operated by Delta (or if a lease is in
effect, in such permitted lessees fleet on which such permitted lessee carries insurance and
operated by such permitted lessee) on the same or similar routes as such Aircraft; provided that
such liability insurance shall not be less than the minimum insurance amount specified in the
applicable Indenture, (ii) that is maintained in effect with insurers of recognized responsibility,
and (iii) which shall cover the perils set forth in the insurance policies maintained in connection
with the CRAF Program (as such insurance policies maintained in connection with the CRAF Program
may be amended from time to time). Except with respect to any war-risk, hijacking or related perils
liability insurance maintained on any aircraft owned or operated by Delta in connection with the
CRAF Program, if war-risk, hijacking or related perils liability insurance is maintained by Delta
(or if a lease is in effect, by such permitted lessee) with respect to any aircraft owned or
operated
S-94
by Delta (or such permitted lessee) of the same or similar type operated by Delta (or such
permitted lessee) on the same or similar routes as operated by such Aircraft, then Delta shall
maintain or cause to be maintained with respect to such Aircraft war-risk, hijacking and related
perils liability insurance in scope and coverage no less comprehensive, in an amount not less than
the insurance maintained by Delta (or such permitted lessee) with respect to such other aircraft,
and with insurers of recognized responsibility. (Indentures, Section 7.06(b))
Delta may self-insure for the above described risks, but the amount of such self-insurance
with respect to all of the aircraft and engines in the combined fleet of Delta and its affiliates
may not exceed for any 12-month policy year 1% of the average aggregate insurable value (during the
preceding policy year) of all aircraft in the combined fleets of Delta and its affiliates on which
Delta and its affiliates carry insurance, unless an insurance broker of national standing certifies
that the standard among all other major U.S. airlines is a higher level of self-insurance, in which
case Delta may self-insure the Aircraft to such higher level. In addition, Delta may self-insure to
the extent of (i) any applicable deductible per occurrence for an Aircraft that is not in excess of
the amount customarily allowed as a deductible in the industry or is required to facilitate claims
handling, or (ii) any applicable mandatory minimum per aircraft (or, if applicable, per annum or
other period) liability insurance or hull insurance deductibles imposed by the aircraft liability
or hull insurers. (Indentures, Section 7.06(d))
In respect of each Aircraft, Delta is required to name the relevant Loan Trustee, each
Trustee, the Subordination Agent and the Liquidity Providers as additional insured parties as their
respective interests may appear under all liability insurance policies required by the terms of the
Indenture with respect to such Aircraft. In addition, the hull and liability insurance policies
will be required to provide that, in respect of the interests of such additional insured party, the
insurance shall not be invalidated or impaired by any action or inaction of Delta (or any permitted
lessee). (Indentures, Section 7.06(a), (b) and (c))
Subject to certain customary exceptions, Delta may not operate (or permit any lessee to
operate) any Aircraft in any area that is excluded from coverage by any insurance policy in effect
with respect to such Aircraft and required by the Indenture or in any war zone or recognized (or,
in Deltas judgment, threatened) areas of hostility. (Indentures, Section 7.02(b))
Events of Loss
If an Event of Loss occurs with respect to the Airframe or the Airframe and one or more
Engines of an Aircraft, Delta must elect within 90 days after such occurrence (i) to replace such
Airframe and any such Engines or (ii) to pay the applicable Loan Trustee the outstanding principal
amount of the Equipment Notes relating to such Aircraft together with interest accrued but unpaid
thereon, but without any premium. Depending upon Deltas election, not later than the first
Business Day after the 120th day following the date of occurrence of such Event of Loss, Delta will
(i) redeem the Equipment Notes under the applicable Indenture by paying to the Loan Trustee the
outstanding unpaid principal amount of such Equipment Notes, together with accrued but unpaid
interest thereon, but without any premium or (ii) substitute an airframe (or airframe and one or
more engines, as the case may be) for the Airframe, or Airframe and Engine(s), that suffered such
Event of Loss. If Delta elects to replace an Airframe (or Airframe and one or more Engines, as the
case may be) that suffered such Event of Loss, it will do so with an airframe or airframe and
engine(s) of the same model as the Airframe or Airframe and Engine(s) to be replaced or a
comparable or improved model, and with a value and utility (without regard to hours or cycles) at
least equal to the
Airframe or Airframe and Engine(s) to be replaced, assuming that such Airframe and such
Engine(s) were in the condition and repair required by the related Indenture. Delta is also
required to provide to the relevant Loan Trustee opinions of counsel (i) to the effect that such
Loan Trustee will be entitled to the benefits of Section 1110 with respect to the replacement
airframe (unless, as a result of a change in law or governmental or judicial interpretation, such
benefits were not available with respect to the Aircraft immediately prior to such replacement),
and (ii) as to the due registration of the replacement aircraft, the due recordation of a
supplement to the Indenture relating to such replacement aircraft, and the validity and perfection
of the security interest granted to the Loan Trustee in the replacement aircraft. If Delta elects
not to replace such Airframe, or Airframe and Engine(s), then upon payment of the outstanding
principal amount of the Equipment Notes issued with respect to such Aircraft, together with accrued
but unpaid
S-95
interest thereon (but without any premium), the lien of the Indenture will terminate
with respect to such Aircraft, and the obligation of Delta thereafter to make the scheduled
interest and principal payments with respect to such Equipment Notes will cease. The payments made
under the Indenture by Delta will be deposited with the applicable Loan Trustee. Amounts in excess
of the amounts due and owing under the Equipment Notes issued with respect to such Aircraft will be
distributed by such Loan Trustee to Delta. (Indentures, Sections 2.10, 3.02, 7.05(a) and 7.05(c))
If an Event of Loss occurs with respect to an Engine alone, Delta will be required to replace
such Engine within 120 days after the occurrence of such Event of Loss with another engine, free
and clear of all liens (other than certain permitted liens). Such replacement engine will be the
same model as the Engine to be replaced, or a comparable or improved model of the same or another
manufacturer, suitable for installation and use on the Airframe, and will have a value and utility
(without regard to hours or cycles) at least equal to the Engine to be replaced, assuming that such
Engine was in the condition and repair required by the terms of the relevant Indenture.
(Indentures, Section 7.05(b))
An Event of Loss with respect to an Aircraft, Airframe or any Engine means any of the
following events with respect to such property:
|
|
|
the loss of such property or of the use thereof due to destruction, damage to such
property beyond repair or rendition of such property permanently unfit for normal use for
any reason whatsoever; |
|
|
|
|
any damage to such property that results in an insurance settlement with respect to
such property on the basis of a total loss or a compromised or constructive total loss; |
|
|
|
|
the theft, hijacking or disappearance of such property for a period exceeding 180
consecutive days; |
|
|
|
|
the requisition for use or hire of such property by any government (other than a
requisition for use or hire by the government of Canada, France, Germany, Japan, The
Netherlands, Sweden, Switzerland, the United Kingdom or the United States or the
government of the country of registry of the Aircraft) that results in the loss of
possession of such property by Delta (or any lessee) for a period exceeding 12 consecutive
months; |
|
|
|
|
the operation or location of the Aircraft, while under requisition for use by any
government, in an area excluded from coverage by any insurance policy required by the
terms of the Indenture, unless Delta has obtained indemnity or insurance in lieu thereof
from such government; |
|
|
|
|
any requisition of title or other compulsory acquisition, capture, seizure,
deprivation, confiscation or detention (excluding requisition for use or hire not
involving a requisition of title) for any reason of the Aircraft by any government that
results in the loss of title or use of the Aircraft by Delta (or a permitted lessee) for a
period in excess of 180 consecutive days; |
|
|
|
|
as a result of any law, rule, regulation, order or other action by the FAA or other
government of the country of registry, the use of the Aircraft or Airframe in the normal
business of air
transportation is prohibited by virtue of a condition affecting all aircraft of the same
type for a period of 18 consecutive months, unless Delta is diligently carrying forward all
steps that are necessary or desirable to permit the normal use of the Aircraft or Airframe
or, in any event, if such use is prohibited for a period of three consecutive years; and |
|
|
|
|
with respect to an Engine only, any divestiture of title to or interest in such Engine
or, in certain circumstances, the installation of such Engine on an airframe that is
subject to a conditional sale or other security agreement. |
S-96
An Event of Loss with respect to an Aircraft is deemed to have occurred if an Event of Loss
occurs with respect to the Airframe that is a part of such Aircraft unless Delta elects to
substitute a replacement Airframe pursuant to the related Indenture. (Indentures, Annex A)
If the Equipment Notes issued under an Indenture are repaid in full in the case of an Event of
Loss with respect to the applicable Aircraft, the lien on such Aircraft under such Indenture will
be released, and such Aircraft will not thereafter secure any other Equipment Notes.
S-97
POSSIBLE REFINANCING OF CLASS B CERTIFICATES
Delta may elect to redeem the Series B Equipment Notes then issued and outstanding and to
issue new Series B Equipment Notes with terms that may differ from those of the redeemed Series B
Equipment Notes (any such new Series B Equipment Notes, the Refinancing Equipment Notes) in
respect of all (but not less than all) of the Aircraft. In such case, Delta will fund the sale of
such Refinancing Equipment Notes through the sale of pass through certificates (the Refinancing
Certificates) issued by a single pass through trust (each, a Refinancing Trust). The trustee of
any Refinancing Trust will become a party to the Intercreditor Agreement, and the Intercreditor
Agreement will be amended by written agreement of Delta and the Subordination Agent to provide for
the subordination of the Refinancing Certificates to the Administration Expenses, the Liquidity
Obligations and the Class A Certificates. Such issuance of Refinancing Equipment Notes and
Refinancing Certificates, and any such amendment of the Intercreditor Agreement (and any amendment
of an Indenture in connection with such refinancing), will be contingent upon each Rating Agency
then rating the Class A Certificates providing written confirmation to the effect that such actions
will not result in a withdrawal, suspension, or downgrading of the rating of the Class A
Certificates. The issuance of Refinancing Certificates in compliance with the foregoing conditions
will not require the consent of any of the Trustees or any holders of Class A Certificates.
(Intercreditor Agreement, Section 8.01(c))
Any Refinancing Certificates may have the benefit of credit support similar to the Class B
Liquidity Facility or different therefrom and claims for fees, interest, expenses, reimbursement of
advances and other obligations arising from such credit support may rank equally with similar
claims in respect of the Class B Liquidity Facility. (Intercreditor Agreement, Section
8.01(c)(iii))
S-98
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain U.S. federal income tax consequences of the
purchase, ownership and disposition of Class B Certificates and the associated Escrow Receipts by a
Certificate Owner that purchases such Class B Certificates in the initial offering thereof at the
offering price set forth in this prospectus supplement and holds such Class B Certificates as
capital assets. This discussion does not address all of the U.S. federal income tax consequences
that may be relevant to Certificate Owners of Class B Certificates in light of their particular
circumstances or to any such Certificate Owners that may be subject to special rules (such as
tax-exempt organizations, banks, dealers and traders in securities that use mark-to-market
accounting, insurance companies, regulated investment companies, real estate investment trusts,
certain former citizens or residents of the United States, Certificate Owners that hold Class B
Certificates as part of a hedging, integrated or conversion transaction or a straddle or
Certificate Owners that have a functional currency other than the U.S. dollar). This discussion
does not address any other U.S. federal tax consequences or any U.S. state or local, or non-U.S.,
tax consequences. This discussion generally is addressed only to beneficial owners of Class B
Certificates that are U.S. Persons and that are not treated as partnerships for U.S. federal income
tax purposes, except that the discussion below under Certain U.S. Federal Income Tax
Consequences to Non-U.S. Certificateholders and Information Reporting and Backup Withholding
addresses certain U.S. federal income tax consequences to Certificate Owners that are not U.S.
Persons. For purposes of this discussion, a U.S. Person means a person that, for U.S. federal
income tax purposes, is (i) an individual citizen or resident of the United States, (ii) a
corporation (including non-corporate entities taxable as corporations) created or organized in or
under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate
the income of which is subject to U.S. federal income tax regardless of its source, (iv) a trust
(x) with respect to which a court within the United States is able to exercise primary supervision
over its administration and one or more U.S. persons have the authority to control all of its
substantial decisions or (y) that has in effect a valid election under U.S. Treasury regulations to
be treated as a U.S. person and (v) except as otherwise provided in U.S. Treasury regulations, a
partnership created or organized in or under the laws of the United States, any state thereof or
the District of Columbia. If an entity treated for U.S. federal income tax purposes as a
partnership invests in Class B Certificates, the U.S. federal income tax consequences of such
investment may depend in part upon the status and activities of such entity and its partners.
Prospective investors that are treated as partnerships for U.S. federal income tax purposes should
consult their own advisors regarding the U.S. federal income tax consequences to them and their
partners of an investment in Class B Certificates.
This discussion is based upon the tax laws of the United States, as well as judicial and
administrative interpretations thereof (in final or proposed form), all as in effect on the date of
this prospectus supplement and all of which are subject to change or differing interpretations,
which could apply retroactively. No rulings have been or will be sought from the Internal Revenue
Service (the IRS) with respect to any of the U.S. federal income tax consequences discussed
below, and no assurance can be given that the IRS will not take positions contrary to the
discussion below. The Class B Trust, the Subordination Agent and the Loan Trustees are not
indemnified for any U.S. federal income taxes or, with certain exceptions, other taxes that may be
imposed upon them, and the imposition of any such taxes could result in a reduction in the amounts
available for distribution to Certificate Owners of Class B Certificates.
PERSONS CONSIDERING AN INVESTMENT IN CLASS B CERTIFICATES SHOULD CONSULT THEIR OWN TAX
ADVISORS REGARDING THE U.S. FEDERAL, STATE AND LOCAL, AND ANY NON-U.S., INCOME AND OTHER TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF CLASS B CERTIFICATES AND THE
ASSOCIATED ESCROW RECEIPTS IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
Tax Status of the Class B Trust
Although there is no authority addressing the classification of entities that are similar to
the Class B Trust in all respects, based upon an interpretation of analogous authorities and the
terms of the Class B Pass Through Trust Agreement, the Note Purchase Agreement, the Class B
Liquidity Facility, the Intercreditor
S-99
Agreement, the Class B Deposit Agreement and the Class B Escrow Agreement, all as in effect on
the Class B Issuance Date, the Class B Trust should be classified as a grantor trust under Subpart
E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as
amended (the Code), for U.S. federal income tax purposes. Each person holding or having a
beneficial interest in a Class B Certificate, by its acceptance of such Class B Certificate or
interest, agrees to treat the Class B Trust as a grantor trust for U.S. federal, state and local
income tax purposes. The Class B Trust intends to file income tax returns and report to investors
on the basis that it is a grantor trust. Except as set forth in the following paragraph and under
Taxation of Certificate Owners Class B Trust Classified as Partnership below, the
discussion below assumes that the Class B Trust will be so classified as a grantor trust.
If the Class B Trust were not classified as a grantor trust for U.S. federal income tax
purposes, the Class B Trust would be classified as a partnership for such purposes, and would not
be classified as an association (or publicly traded partnership) taxable as a corporation and,
accordingly, would not itself be subject to U.S. federal income tax, provided that at least 90% of
the Class B Trusts gross income for each of its taxable years is qualifying income (which
generally includes, among other things, interest income, gain from the sale or other disposition of
capital assets held for the production of interest income and income derived with respect to a
business of investing in securities). Assuming the Class B Trust operates in accordance with the
terms of the Class B Pass Through Trust Agreement and the other agreements to which it is a party,
income derived by the Class B Trust from the Series B Equipment Notes owned by the Class B Trust
and the Note Purchase Agreement will constitute qualifying income for these purposes.
Taxation of Certificate Owners
General
Each Certificate Owner of a Class B Certificate will be treated as the owner of a pro rata
undivided interest in the Series B Equipment Notes, the contractual rights and obligations under
the Note Purchase Agreement and any other property held in the Class B Trust and will be required
to report on its U.S. federal income tax return its pro rata share of the entire income from such
Equipment Notes and other property in accordance with such Certificate Owners method of
accounting. A Certificate Owner of a Class B Certificate using the cash method of accounting
generally must take into account its pro rata share of income as and when received by the Class B
Trustee. A Certificate Owner of a Class B Certificate using the accrual method of accounting
generally must take into account its pro rata share of income as it accrues or is received by the
Class B Trustee, whichever is earlier.
It is anticipated that the Series B Equipment Notes will not be issued with original issue
discount (OID) for U.S. federal income tax purposes. If, however, any Series B Equipment Note is
issued with more than a de minimis amount of OID, a Certificate Owner of a Class B Certificate
generally would be required to include such OID in income for U.S. federal income tax purposes as
it accrues under a constant yield method based on a compounding of interest, regardless of such
Certificate Owners method of accounting and prior to such Certificate Owners receipt of cash
attributable to such income.
Each Certificate Owner of a Class B Certificate will also be treated as the owner of a pro
rata undivided interest in the associated Deposits. Certificate Owners of Class B Certificates that
use the accrual method of accounting, or that are otherwise subject to Section 1281 of the Code,
generally are required to accrue any OID, and any stated interest not included in OID, on the
associated Deposits. In the case of a Certificate Owner of Class B Certificates who is not required
(and who does not elect) to accrue any such OID and interest, (i) any gain realized on an
associated Deposit generally will be ordinary income to the extent of the accrued OID and stated
interest and (ii) such Certificate Owner may be required to defer, until sale of the Class B
Certificate or payment on the associated Deposit, deductions for interest expense incurred or
continued by such Certificate Owner to purchase or carry its interest in such Deposit. The
preceding sentence does not apply if the Certificate Owner elects to accrue income with respect to
the associated Deposits under Section 1281. As the yield on each associated Deposit will depend in
part on when it is drawn to fund the purchase of Series B Equipment Notes, Certificate Owners
should consult their
own tax advisors as to how to calculate the accrued OID on the associated Deposits and the
amount of gain or loss treated as ordinary under these rules.
S-100
Each Certificate Owner of a Class B Certificate will be entitled to deduct, consistent with
its method of accounting, its pro rata share of fees and expenses paid or incurred by the Class B
Trust as provided in Section 162 or 212 of the Code. Certain fees and expenses, including fees paid
to the Class B Trustee and Class B Liquidity Provider, will be borne by parties other than the
Certificate Owners of Class B Certificates. It is possible that such fees and expenses will be
treated as constructively received by the Class B Trust, in which event a Certificate Owner of a
Class B Certificate will be required to include in income and will be entitled to deduct its pro
rata share of such fees and expenses. If such Certificate Owner is an individual, estate or trust,
the deduction for such Certificate Owners share of such fees and expenses will be allowed only to
the extent that all of such Certificate Owners miscellaneous itemized deductions, including such
Certificate Owners share of such fees and expenses, exceed 2% of such Certificate Owners adjusted
gross income. In addition, in the case of Certificate Owners who are individuals, certain otherwise
allowable itemized deductions generally will be subject to additional limitations on itemized
deductions under the applicable provisions of the Code.
Sale, Exchange or Other Disposition of Class B Certificates
A Certificate Owner of a Class B Certificate that sells, exchanges or otherwise disposes of
such Class B Certificate generally will recognize capital gain or loss (in the aggregate) equal to
the difference between the amount realized on such sale, exchange or other disposition (except to
the extent attributable to accrued interest, which will be taxable as interest income if not
previously included in income, or to the associated Escrow Receipt) and such Certificate Owners
adjusted tax basis in the Series B Equipment Notes and any other property held by the Class B Trust
(not including the tax basis attributable to the associated Escrow Receipt). Any such gain or loss
generally will be long-term capital gain or loss if such Class B Certificate was held for more than
one year (except to the extent attributable to any property held by the Class B Trust for one year
or less). Any long-term capital gains with respect to the Class B Certificates generally are
taxable to corporate taxpayers at the rates applicable to ordinary income and to individual
taxpayers at lower rates than the rates applicable to ordinary income. There are limitations on
deducting capital losses.
Upon a sale, exchange or other disposition of a Class B Certificate, the Certificate Owner
will also recognize gain or loss equal to the difference between the amount realized allocable to
the associated Escrow Receipt (which evidences such Certificate Owners interest in the associated
Deposits) and the Certificate Owners adjusted tax basis in such Escrow Receipt. Any such gain may
be ordinary income, in whole or in part, as described above under Taxation of Certificate
OwnersGeneral. Any such gain or loss not so treated as ordinary generally would be short-term
capital gain or loss.
Class B Trust Classified as Partnership
If the Class B Trust were classified as a partnership (and not as a publicly traded
partnership taxable as a corporation) for U.S. federal income tax purposes, income or loss with
respect to the assets held by the Class B Trust would be calculated at the trust level, but the
Class B Trust itself would not be subject to U.S. federal income tax. A Certificate Owner of a
Class B Certificate would be required to report its share of the Class B Trusts items of income
and deduction on its tax return for its taxable year within which the Class B Trusts taxable year
(which should be the calendar year) ends, as well as such Certificate Owners income from the
associated Deposits. In the case of an original purchaser of a Class B Certificate that is a
calendar year taxpayer, income and loss generally should be the same as it would be if the Class B
Trust were classified as a grantor trust, except that income or loss would be reported on an
accrual basis even if the Certificate Owner otherwise uses the cash method of accounting.
Certain U.S. Federal Income Tax Consequences to Non-U.S. Certificateholders
Subject to the discussion of backup withholding below, payments of principal, Make-Whole
Amount, if any, and interest on the Series B Equipment Notes or the associated Deposits to, or on
behalf of, any Certificate Owner of a Class B Certificate that is neither a U.S. Person nor an
entity treated as a partnership
for U.S. federal income tax purposes (a Non-U.S. Certificateholder) generally will not be
subject to U.S. federal withholding tax, provided that, in the case of any amount treated as
interest (including OID, if applicable):
S-101
(i) such amount is not effectively connected with the conduct of a trade or business
within the United States by such Non-U.S. Certificateholder;
(ii) such Non-U.S. Certificateholder does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of Delta or the Depositary, as the case may
be, entitled to vote;
(iii) such Non-U.S. Certificateholder is not a controlled foreign corporation within the
meaning of the Code that is related to Delta or the Depositary, as the case may be;
(iv) such Non-U.S. Certificateholder is not a bank receiving interest pursuant to a loan
agreement entered into in the ordinary course of its trade or business; and
(v) the certification requirements described below are satisfied.
The certification requirements referred to in clause (v) above generally will be satisfied if
the Non-U.S. Certificateholder certifies, under penalties of perjury, that it is not a U.S. Person
and provides its name and address and certain other information to the applicable withholding agent
(generally on IRS Form W-8BEN or a suitable substitute form). U.S. Treasury regulations provide
additional rules for satisfying these certification requirements in the case of Class B
Certificates held through one or more intermediaries or pass-through entities.
Subject to the discussion of backup withholding below, any gain (not including any amount
treated as interest or OID) realized by a Non-U.S. Certificateholder upon the sale, exchange or
other disposition of a Class B Certificate or the associated Escrow Receipt or with respect to any
associated Series B Equipment Note or Deposit generally will not be subject to U.S. federal income
or withholding taxes if (i) such gain is not effectively connected with the conduct of a trade or
business within the United States by the Non-U.S. Certificateholder and (ii) in the case of an
individual Non-U.S. Certificateholder, such individual is not present in the United States for 183
days or more in the taxable year of the sale, exchange or other disposition.
Any interest (including OID, if applicable) on the Series B Equipment Notes or the associated
Deposits or gain from the sale, exchange or other disposition of a Class B Certificate or the
associated Escrow Receipt, the Series B Equipment Notes or the associated Deposits generally will
be subject to regular U.S. federal income tax at graduated rates (and in certain cases a branch
profits tax) if it is effectively connected with the conduct of a trade or business within the
United States by a Non-U.S. Certificateholder, unless an applicable treaty provides an exemption.
In lieu of providing an IRS Form W-8BEN as described above, such Non-U.S. Certificateholder
generally is required to provide IRS Form W-8ECI in order to claim an exemption from U.S. federal
withholding tax with respect to amounts treated as interest.
Prospective investors that are not U.S. Persons should consult their own tax advisors
regarding the income, estate and other tax consequences to them of the purchase, ownership and
disposition of Class B Certificates and the associated Escrow Receipts under U.S. federal, state
and local, and any other relevant, law in light of their own particular circumstances. If any U.S.
federal or other tax is required to be withheld with respect to a Non-U.S. Certificateholder, Delta
will not be required to pay any additional amount to such Non-U.S. Certificateholder.
Information Reporting and Backup Withholding
In general, payments made on the Class B Certificates or the associated Escrow Receipts, and
proceeds from the sale, exchange or other disposition of such Certificates and Escrow Receipts to
or through certain
brokers, will be subject to information reporting requirements, unless the payee is a
corporation, tax-exempt organization or other person exempt from such reporting (and when required,
demonstrates that it is so exempt). Such payments and proceeds may also be subject to a backup
withholding tax unless the Certificate Owner complies with certain reporting requirements or an
exemption from such tax is otherwise
S-102
applicable. Any such withheld amounts will be allowed as a
credit against the Certificate Owners U.S. federal income tax, and may entitle such Certificate
Owner to a refund, if the required information is furnished on a timely basis to the IRS. Penalties
may be imposed by the IRS on a Certificate Owner who is required to supply information but does not
do so in the proper manner.
The amount of interest (including OID, if applicable) paid on the Series B Equipment Notes or
the associated Deposits to or on behalf of a Non-U.S. Certificateholder and the amount of U.S.
federal income tax, if any, withheld from such payments generally must be reported annually to the
IRS and such Non-U.S. Certificateholder.
S-103
CERTAIN DELAWARE TAXES
The Class B Trustee is a national banking association headquartered in Delaware that will act
through its corporate trust office in Delaware. Richards, Layton & Finger, PA, special Delaware
counsel to the Class B Trustee, has advised Delta that, in its opinion, under currently applicable
law, assuming that the Class B Trust will not be taxable as a corporation for U.S. federal income
tax purposes, but, rather, that it will be classified for such purposes as a grantor trust or as a
partnership, (i) the Class B Trust will not be subject to any tax (including, without limitation,
net or gross income, tangible or intangible property, net worth, capital, franchise, or doing
business tax), fee or other governmental charge under the laws of the State of Delaware or any
political subdivision of such state and (ii) Certificate Owners of Class B Certificates that are
not residents of or otherwise subject to tax in Delaware will not be subject to any tax (including,
without limitation, net or gross income, tangible or intangible property, net worth, capital,
franchise, or doing business tax), fee or other governmental charge under the laws of the State of
Delaware or any political subdivision of such state as a result of purchasing, owning (including
receiving payments with respect to) or selling a Class B Certificate. Neither the Class B Trust nor
the Certificate Owners of Class B Certificates will be indemnified for any state or local taxes
imposed on them, and the imposition of any such taxes on the Class B Trust could result in a
reduction in the amounts available for distribution to the Certificate Owners of such Trust. In
general, should a Certificate Owner of Class B Certificates or the Class B Trust be subject to any
state or local tax that would not be imposed if such Trust were administered in a different
jurisdiction in the United States or if the Class B Trustee were located in a different
jurisdiction in the United States, the Class B Trustee will either relocate the administration of
the Class B Trust to such other jurisdiction or resign and, in the event of such a resignation, a
new Class B Trustee in such other jurisdiction will be appointed.
S-104
CERTAIN ERISA CONSIDERATIONS
This discussion is based upon ERISA and the tax laws of the United States, as well as judicial
and administrative interpretations thereof (in final or proposed form), all as in effect on the
date of this prospectus supplement and all of which are subject to change or differing
interpretations, which could apply retroactively.
General
A fiduciary of a retirement plan or other employee benefit plan or arrangement, including for
this purpose an individual retirement account, annuity or Keogh plan, that is subject to Title I of
the Employee Retirement Income Security Act of 1974, as amended (ERISA), or Section 4975 of the
Code (an ERISA Plan), or such a plan or arrangement which is a non-U.S., church or governmental
plan or arrangement exempt from Title I of ERISA and Section 4975 of the Code but subject to a
non-U.S., federal, state, or local law which is substantially similar to the provisions of Title I
of ERISA or Section 4975 of the Code (each, a Similar Law) (in each case, including an ERISA
Plan, a Plan), should consider whether an investment in the Class B Certificates is appropriate
for the Plan, taking into account the provisions of the Plan documents, the overall investment
policy of the Plan and the composition of the Plans investment portfolio, as there are imposed on
Plan fiduciaries certain fiduciary requirements, including those of investment prudence and
diversification and the requirement that a Plans investments be made in accordance with the
documents governing the Plan. Further, a fiduciary should consider the fact that in the future
there may be no market in which such fiduciary would be able to sell or otherwise dispose of the
Class B Certificates.
Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the
assets of an ERISA Plan and certain persons (referred to as parties in interest or disqualified
persons) having certain relationships to such Plans, unless a statutory or administrative
exemption is applicable to the transaction. A party in interest or disqualified person who engages
in a prohibited transaction may be subject to excise taxes and other penalties and liabilities
under ERISA and the Code.
Any Plan fiduciary which proposes to cause a Plan to purchase Class B Certificates should
consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited
transaction provisions of ERISA and the Code and Similar Law to such an investment, and to confirm
that such purchase and holding will not constitute or result in a non-exempt prohibited transaction
or any other violation of an applicable requirement of ERISA or Similar Law.
Plan Assets Issues
The Department of Labor has promulgated a regulation, 29 CFR Section 2510.3-101, as modified
by Section 3(42) of ERISA (the Plan Asset Regulation), describing what constitutes the assets of
an ERISA Plan with respect to the ERISA Plans investment in an entity for purposes of ERISA and
Section 4975 of the Code. Under the Plan Asset Regulation, if an ERISA Plan invests (directly or
indirectly) in a Class B Certificate, the ERISA Plans assets will include both the Class B
Certificate and an undivided interest in each of the underlying assets of the Class B Trust,
including the Series B Equipment Notes, unless it is established that equity participation in the
Class B Trust by benefit plan investors (including but not limited to ERISA Plans and entities
whose underlying assets include ERISA Plan assets by reason of an ERISA Plans investment in the
entity) is not significant within the meaning of the Plan Asset Regulation. In this regard, the
extent to which there is equity participation in the Class B Trust by, or on behalf of, benefit
plan investors will not be monitored. If the assets of the Class B Trust are deemed to constitute
the assets of an ERISA Plan, transactions involving the assets of such Trust could be subject to
the prohibited transaction provisions of ERISA and Section 4975 of the Code or materially similar
provisions of Similar Law unless a statutory or administrative exemption is applicable to the
transaction. In addition, an Escrow Receipt will be affixed to each Class B Certificate and will
evidence an interest in the Deposits held in escrow by the Escrow Agent for the benefit of the
Class B Certificateholders pending the financing of the Aircraft. Such Deposits will not constitute
property of the Class B Trust. Pending withdrawal of such Deposits in accordance with the Class B
Deposit Agreement, the Class B Escrow Agreement and the Note Purchase
S-105
Agreement, such Deposits may be deemed plan
assets subject to the fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 of the Code.
Prohibited Transaction Exemptions
In addition, whether or not the assets of the Class B Trust are deemed to be ERISA Plan assets
under the Plan Asset Regulation, the fiduciary of a Plan that proposes to purchase and hold any
Class B Certificates should consider, among other things, whether such purchase and holding may
involve (i) the direct or indirect extension of credit to a party in interest or a disqualified
person, (ii) the sale or exchange of any property between an ERISA Plan and a party in interest or
a disqualified person, or (iii) the transfer to, or use by or for the benefit of, a party in
interest or a disqualified person, of any ERISA Plan assets. Such parties in interest or
disqualified persons could include, without limitation, Delta, the underwriter, the Trustees, the
Liquidity Providers, the Loan Trustees, the Subordination Agent, the Escrow Agent, the Depositary,
the Paying Agent and their respective affiliates. Moreover, if Class A Certificates are purchased
by an ERISA Plan and Class B Certificates are held by a party in interest or a disqualified person
with respect to such ERISA Plan, the exercise by such holder of Class B Certificates of its right
to purchase the Class A Certificates upon the occurrence and during the continuation of certain
events could be considered to constitute a prohibited transaction unless a statutory or
administrative exemption were applicable. In addition, if Class B Certificates are purchased by an
ERISA Plan and the Class A Certificates are held by a party in interest or a disqualified person
with respect to such ERISA Plan, the exercise by such holder of Class B Certificates of its right
to purchase the Class A Certificates upon the occurrence and during the continuation of certain
events could be considered to constitute a prohibited transaction unless a statutory or
administrative exemption were applicable. Depending on the satisfaction of certain conditions which
may include the identity of the ERISA Plan fiduciary making the decision to acquire or hold the
Class B Certificates on behalf of an ERISA Plan, Prohibited Transaction Class Exemption (PTCE)
91-38 (relating to investments by bank collective investment funds), PTCE 84-14 (relating to
transactions effected by a qualified professional asset manager), PTCE 95-60 (relating to
investments by an insurance company general account), PTCE 96-23 (relating to transactions directed
by an in-house asset manager) or PTCE 90-1 (relating to investments by insurance company pooled
separate accounts) (collectively, the Class Exemptions) could provide an exemption from the
prohibited transaction restrictions of ERISA and Section 4975 of the Code. However, there can be no
assurance that any of these Class Exemptions or any other exemption will be available with respect
to any particular transaction involving the Class B Certificates.
Each person who acquires a Class B Certificate or an interest therein will be deemed by such
acquisition to have represented and warranted that either: (i) no assets of a Plan or any trust
established with respect to a Plan have been used to acquire such Class B Certificate or an
interest therein or (ii) the purchase and holding of such Class B Certificate or an interest
therein by such person are exempt from the prohibited transaction restrictions of ERISA and the
Code or provisions of Similar Law pursuant to one or more statutory or administrative exemptions.
Special Considerations Applicable to Insurance Company General Accounts
Any insurance company proposing to purchase Class B Certificates should consider the
implications of the United States Supreme Courts decision in John Hancock Mutual Life Insurance
Co. v. Harris Trust and Savings Bank, 510 U.S. 86, 114 S. Ct. 517 (1993), which in certain
circumstances treats such general account assets as assets of an ERISA Plan that owns a policy or
other contract with such insurance company, as well as the effect of Section 401(c) of ERISA as
interpreted by regulations issued by the United States Department of Labor in January, 2000 (the
General Account Regulations).
EACH PLAN FIDUCIARY SHOULD CONSULT WITH ITS LEGAL ADVISOR CONCERNING THE POTENTIAL
CONSEQUENCES TO THE PLAN UNDER ERISA, THE CODE OR SIMILAR LAW OF AN INVESTMENT IN ANY OF THE CLASS
B CERTIFICATES.
S-106
UNDERWRITING
Citigroup Global Markets Inc. is acting as the underwriter of the offering. Under the terms
and subject to the conditions contained in the underwriting agreement, dated the date of this
prospectus supplement, the underwriter has agreed with Delta to purchase $102,000,000 aggregate
face amount of the Class B Certificates.
The underwriting agreement provides that the obligations of the underwriter are subject to
certain conditions precedent and that the underwriter will be obligated to purchase all of the
Class B Certificates, if any are purchased. The underwriting agreement provides that, if the
underwriter defaults on its purchase commitment, the offering of Class B Certificates may be
terminated. The offering of the Class B Certificates by the underwriter is subject to receipt and
acceptance and subject to the underwriters right to reject any order in whole or in part.
The aggregate proceeds from the sale of the Class B Certificates will be $102,000,000. Delta
will pay the underwriter a commission of
$1,147,500. Delta estimates that its out of pocket expenses
for the offering will be approximately $1,000,000 (exclusive of the ongoing costs of the Class B
Liquidity Facility and certain other ongoing costs). The underwriter will reimburse us for certain
expenses in an amount not to exceed $637,500.
The underwriter proposes to offer the Class B Certificates to the public at the public
offering price on the cover page of this prospectus supplement. After the initial offering of
Class B Certificates, the offering price may be changed by the underwriter.
The Class B Certificates are a new issue of securities with no established trading market.
Neither Delta nor the Class B Trust intends to apply for listing of the Class B Certificates on any
securities exchange. Delta has been advised by the underwriter that it presently intends to make a
market in the Class B Certificates, as permitted by applicable laws and regulations. The
underwriter is not obligated, however, to make a market in the Class B Certificates, and any such
market-making may be discontinued at any time without notice, at the sole discretion of the
underwriter. Accordingly, no assurance can be given as to the liquidity of, or trading markets for,
the Class B Certificates. See Risk Factors Risk Factors Relating to the Class B Certificates
and the Offering Because there is no current market for the Class B Certificates and the Class B
Certificates are subject to transfer restrictions, you may have a limited ability to resell Class B
Certificates.
Delta has agreed to reimburse the underwriter for certain expenses and has agreed to indemnify
the underwriter against certain liabilities, including liabilities under the Securities Act, or
contribute to payments which the underwriter may be required to make in respect thereof.
The underwriter and its affiliates are full service financial institutions engaged in various
activities, which may include securities trading, commercial and investment banking, financial
advisory, investment management, investment research, principal investment, hedging, financing and
brokerage activities.
From time to time in the ordinary course of their respective business, the underwriter and
certain of its affiliates have engaged, and in the future may engage in, investment and commercial
banking or other transactions of a financial nature with Delta and its affiliates, including the
provision of certain advisory services, making loans to Delta and its affiliates and serving as
counterparties to certain fuel hedging and other derivative and hedging arrangements. The
underwriter and its affiliates have received, and in the future may receive, customary fees and
expenses and commissions for these transactions.
In the ordinary course of their various business activities, the underwriter and its
affiliates may make or hold a broad array of investments and actively trade debt and equity
securities (or related derivative securities) and financial instruments (including bank loans) for
their own account and for the accounts of their customers and such investment and securities
activities may involve securities and/or instruments of Delta. The underwriter and its affiliates
may also make investment recommendations and/or publish or
S-107
express independent research views in respect of such securities or instruments and may at any
time hold, or recommend to clients that they acquire, long and/or short positions in such
securities and instruments.
Selling Restrictions
This prospectus supplement and the accompanying prospectus do not constitute an offer of, or a
solicitation of an offer by or on behalf of us or the underwriter to subscribe for or purchase, any
of the Class B Certificates in any jurisdiction to or from any person to whom or from whom it is
unlawful to make such an offer or solicitation in that jurisdiction. The distribution of this
prospectus supplement and the accompanying prospectus and the offering of the Class B Certificates
in certain jurisdictions may be restricted by law.
S-108
VALIDITY OF THE CLASS B CERTIFICATES
The validity of the Class B Certificates is being passed upon for Delta by Debevoise &
Plimpton LLP, New York, New York, and for the underwriter by Shearman & Sterling LLP, New York, New
York. The respective counsel for Delta and the underwriter will rely upon the opinion of Shipman &
Goodwin LLP, Hartford, Connecticut, counsel to U.S. Bank Trust National Association, as to certain
matters relating to the authorization, execution, and delivery of the Basic Agreement, the Class B
Trust Supplement and the Class B Certificates, and the valid and binding effect thereof, and on the
opinion of Leslie P. Klemperer, Vice President Deputy General Counsel of Delta, as to certain
matters relating to the authorization, execution, and delivery of the Basic Agreement and the Class
B Trust Supplement by Delta.
EXPERTS
Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated
financial statements included in the Delta Air Lines, Inc. Annual Report on Form 10-K for the year
ended December 31, 2010 and the effectiveness of our internal control over financial reporting as
of December 31, 2010, as set forth in their reports, which are incorporated by reference in this
prospectus supplement. Our consolidated financial statements are incorporated by reference in
reliance on Ernst & Young LLPs reports, given on their authority as experts in accounting and
auditing.
The references to AISI, BK and MBA, and to their respective appraisal reports, are included
herein in reliance upon the authority of each such firm as an expert with respect to the matters
contained in its appraisal report.
S-109
APPENDIX I
INDEX OF DEFINED TERMS
The following is an index showing the page in this prospectus supplement where certain
defined terms appear.
|
|
|
|
|
2001-1 EETC |
|
|
S-31 |
|
60-Day Period |
|
|
S-44 |
|
Actual Disposition Event |
|
|
S-77 |
|
Administration Expenses |
|
|
S-74 |
|
Aircraft |
|
|
S-3 |
|
Airframe |
|
|
S-80 |
|
AISI |
|
|
S-3 |
|
Applicable Fraction |
|
|
S-76 |
|
Appraisal |
|
|
S-74 |
|
Appraised Current Market Value |
|
|
S-74 |
|
Appraisers |
|
|
S-3 |
|
Assumed Aircraft Value |
|
|
S-87 |
|
Assumed Amortization Schedule |
|
|
S-39 |
|
Average Life Date |
|
|
S-86 |
|
Bank |
|
|
S-59 |
|
Bankruptcy Code |
|
|
S-14 |
|
Base Rate |
|
|
S-68 |
|
Basic Agreement |
|
|
S-34 |
|
BK |
|
|
S-3 |
|
BNMC |
|
|
S-59 |
|
Business Day |
|
|
S-39 |
|
Cape Town Treaty |
|
|
S-92 |
|
Cash Collateral Account |
|
|
S-65 |
|
Cede |
|
|
S-41 |
|
Certificate Account |
|
|
S-38 |
|
Certificate Buyout Event |
|
|
S-44 |
|
Certificate Owner |
|
|
S-53 |
|
Certificate Owners |
|
|
S-53 |
|
Certificateholders |
|
|
S-34 |
|
Certificates |
|
|
S-34 |
|
citizen of the United States |
|
|
S-45 |
|
Class A Certificateholders |
|
|
S-34 |
|
Class A Certificates |
|
|
S-34 |
|
Class A Deposit |
|
|
S-57 |
|
Class A Deposit Agreement |
|
|
S-57 |
|
Class A Escrow Agreement |
|
|
S-61 |
|
Class A Liquidity Facility |
|
|
S-64 |
|
Class A Liquidity Provider |
|
|
S-64 |
|
Class A Pass Through Trust Agreement |
|
|
S-34 |
|
Class A Receiptholders |
|
|
S-61 |
|
Class A Trust |
|
|
S-34 |
|
Class A Trust Supplement |
|
|
S-34 |
|
Class A Trustee |
|
|
S-34 |
|
Class B Adjusted Interest |
|
|
S-76 |
|
Class B Certificateholders |
|
|
S-34 |
|
Class B Certificates |
|
|
S-34 |
|
Class B Deposit |
|
|
S-57 |
|
Class B Deposit Agreement |
|
|
S-57 |
|
Class B Escrow Agreement |
|
|
S-61 |
|
Class B Issuance Date |
|
|
S-39 |
|
|
|
|
|
|
Class B Liquidity Facility |
|
|
S-64 |
|
Class B Liquidity Provider |
|
|
S-64 |
|
Class B Pass Through Trust Agreement |
|
|
S-34 |
|
Class B Receiptholders |
|
|
S-61 |
|
Class B Trust |
|
|
S-34 |
|
Class B Trust Supplement |
|
|
S-34 |
|
Class B Trustee |
|
|
S-34 |
|
Class Exemptions |
|
|
S-106 |
|
Code |
|
|
S-100 |
|
Collateral |
|
|
S-37 |
|
Company |
|
iii |
|
company free writing prospectus |
|
|
i |
|
Controlling Party |
|
|
S-71 |
|
Current Distribution Date |
|
|
S-76 |
|
Deemed Disposition Event |
|
|
S-77 |
|
Defaulted Operative Indenture |
|
|
S-84 |
|
Definitive Certificates |
|
|
S-54 |
|
Delivery Period Event of Loss |
|
|
S-58 |
|
Delivery Period Termination Date |
|
|
S-82 |
|
Delta |
|
iii |
|
Delta Bankruptcy Event |
|
|
S-73 |
|
Deposit |
|
|
S-57 |
|
Deposit Agreements |
|
|
S-57 |
|
Depositary |
|
|
S-59 |
|
Depositary Threshold Rating |
|
|
S-58 |
|
Depreciation Assumption |
|
|
S-87 |
|
Distribution Date |
|
|
S-36 |
|
Dodd Frank Act |
|
|
S-30 |
|
DOT |
|
|
S-24 |
|
Downgrade Drawing |
|
|
S-65 |
|
Drawing |
|
|
S-67 |
|
DTC |
|
|
S-41 |
|
DTC Participants |
|
|
S-52 |
|
DTC Rules |
|
|
S-53 |
|
Eligible B Pool Balance |
|
|
S-77 |
|
Engine |
|
|
S-80 |
|
Equipment Note Special Payment |
|
|
S-75 |
|
Equipment Notes |
|
|
S-83 |
|
ERISA |
|
|
S-105 |
|
ERISA Plan |
|
|
S-105 |
|
Escrow Agent |
|
|
S-61 |
|
Escrow Agreements |
|
|
S-61 |
|
Escrow Receipts |
|
|
S-61 |
|
Event of Loss |
|
|
S-96 |
|
Excess Liquidity Obligations |
|
|
S-72 |
|
Exchange Act |
|
|
v |
|
Existing Financings |
|
|
S-31 |
|
Expected Distributions |
|
|
S-76 |
|
FAA |
|
|
S-24 |
|
Final Distributions |
|
|
S-72 |
|
I-1
|
|
|
|
|
Final Drawing |
|
|
S-67 |
|
Final Legal Distribution Date |
|
|
S-37 |
|
Final Maturity Date |
|
|
S-85 |
|
Final Termination Notice |
|
|
S-69 |
|
General Account Regulations |
|
|
S-106 |
|
Global Certificate |
|
|
S-52 |
|
H.15(519) |
|
|
S-86 |
|
Indenture |
|
|
S-83 |
|
Indenture Events of Default |
|
|
S-88 |
|
Indenture Form |
|
|
S-50 |
|
Indirect Participants |
|
|
S-52 |
|
Intercreditor Agreement |
|
|
S-71 |
|
Interest Drawings |
|
|
S-64 |
|
Interim Restructuring Arrangement |
|
|
S-73 |
|
Investment Company Act |
|
|
S-29 |
|
IRS |
|
|
S-99 |
|
LIBOR |
|
|
S-68 |
|
Liquidity Event of Default |
|
|
S-69 |
|
Liquidity Expenses |
|
|
S-76 |
|
Liquidity Facilities |
|
|
S-64 |
|
Liquidity Obligations |
|
|
S-76 |
|
Liquidity Provider |
|
|
S-64 |
|
Liquidity Providers |
|
|
S-64 |
|
Liquidity Threshold Rating |
|
|
S-66 |
|
Loan Amount |
|
|
S-94 |
|
Loan Trustee |
|
|
S-83 |
|
Long-Term Rating |
|
|
S-66 |
|
LTVs |
|
|
S-4, S-87 |
|
Make-Whole Amount |
|
|
S-86 |
|
Make-Whole Spread |
|
|
S-86 |
|
Maximum Available Commitment |
|
|
S-64 |
|
Maximum Commitment |
|
|
S-65 |
|
MBA |
|
|
S-3 |
|
Minimum Sale Price |
|
|
S-72 |
|
Moodys |
|
|
S-58 |
|
Mortgage Convention |
|
|
S-93 |
|
most recent H.15(519) |
|
|
S-86 |
|
NOLs |
|
|
S-22 |
|
Non-Extension Drawing |
|
|
S-67 |
|
Non-U.S. Certificateholder |
|
|
S-101 |
|
Northwest |
|
iii |
|
Note Purchase Agreement |
|
|
S-49 |
|
Note Target Price |
|
|
S-73 |
|
Noteholder |
|
|
S-84 |
|
OID |
|
|
S-100 |
|
Outside Termination Date |
|
|
S-58 |
|
Participation Agreement |
|
|
S-83 |
|
Participation Agreement Form |
|
|
S-50 |
|
Pass Through Trust Agreements |
|
|
S-34 |
|
Paying Agent |
|
|
S-61 |
|
Paying Agent Account |
|
|
S-38 |
|
|
|
|
|
|
Performing Equipment Note |
|
|
S-65 |
|
Permitted Investments |
|
|
S-42 |
|
Plan |
|
|
S-105 |
|
Plan Asset Regulation |
|
|
S-105 |
|
Pool Balance |
|
|
S-39 |
|
Pool Factor |
|
|
S-39 |
|
Post Default Appraisals |
|
|
S-74 |
|
PTC Event of Default |
|
|
S-44 |
|
PTCE |
|
|
S-106 |
|
QIBs |
|
|
S-29 |
|
Rate Determination Notice |
|
|
S-68 |
|
Rating Agencies |
|
|
S-58 |
|
Receiptholders |
|
|
S-61 |
|
Refinancing Certificates |
|
|
S-98 |
|
Refinancing Equipment Notes |
|
|
S-98 |
|
Refinancing Trust |
|
|
S-98 |
|
Regular Distribution Dates |
|
|
S-36 |
|
Related Equipment Notes |
|
|
S-84 |
|
Remaining Weighted Average Life |
|
|
S-86 |
|
Replacement Depositary |
|
|
S-58 |
|
Replacement Facility |
|
|
S-66 |
|
Required Amount |
|
|
S-64 |
|
Required Terms |
|
|
S-50 |
|
Restructuring Arrangement |
|
|
S-73 |
|
Scheduled Payments |
|
|
S-37 |
|
SEC |
|
iv |
|
Section 1110 |
|
|
S-15 |
|
Section 1110 Period |
|
|
S-65 |
|
Securities Act |
|
|
S-15 |
|
Series A Equipment Notes |
|
|
S-83 |
|
Series B Equipment Notes |
|
|
S-83 |
|
Short-Term Rating |
|
|
S-66 |
|
Similar Law |
|
|
S-105 |
|
Special Distribution Date |
|
|
S-37, S-38 |
|
Special Payment |
|
|
S-37 |
|
Special Payments Account |
|
|
S-38 |
|
Special Termination Drawing |
|
|
S-67 |
|
Special Termination Notice |
|
|
S-69 |
|
Standard & Poors |
|
|
S-58 |
|
Stated Interest Rate |
|
|
S-36 |
|
Subordination Agent |
|
|
S-71 |
|
Termination Notice |
|
|
S-69 |
|
Transportation Code |
|
|
S-45 |
|
Treasury Yield |
|
|
S-86 |
|
Triggering Event |
|
|
S-37 |
|
Trust Indenture Act |
|
|
S-46 |
|
Trust Property |
|
|
S-34 |
|
Trust Supplements |
|
|
S-34 |
|
Trustees |
|
|
S-34 |
|
Trusts |
|
|
S-34 |
|
U.S. Person |
|
|
S-99 |
|
I-2
Delta Air
Lines, Inc.
1030 Delta Boulevard
Atlanta, GA 30354
Sight Unseen Base Value
Opinion
26 Aircraft Portfolio
AISI File No.:
A1S013BVO-3
Report Date: 10 March
2011
Values as of: 05 March
2011
Headquarters:
26072 Merit Circle, Suite 123, Laguna Hills, CA 92653
TEL:
949-582-8888 FAX:
949-582-8887 E-MAIL:
mail@AISI.aero
10 March 2011
Delta Air Lines, Inc.
1030 Delta Boulevard
Atlanta, GA 30354
|
|
|
|
|
|
Subject:
|
|
Sight Unseen Base Value Opinion
26 Aircraft portfolio
|
|
|
|
|
|
AISI File number: A1S013BVO-3
|
|
|
|
Ref:
|
|
(a) Email messages, 07 - 10 March 2011
|
Dear Ladies and Gentlemen:
Aircraft Information Services, Inc. (AISI) has been requested to
offer our opinion of the 05 March 2011 sight unseen base
value in half life and maintenance adjusted condition for twenty
six aircraft as identified and defined in Table I and reference
(a) above (the Aircraft). Aircraft are valued
in 05 March 2011 million US dollars.
|
|
1.
|
Methodology
and Definitions
|
The standard terms of reference for commercial aircraft value
are base value and current market value
of an average aircraft. Base value is a theoretical
value that assumes a hypothetical balanced market while current
market value is the value in the real market; both assume a
hypothetical average aircraft condition. All other values are
derived from these values. AISI value definitions are consistent
with the current definitions of the International Society of
Transport Aircraft Trading (ISTAT), those of 01 January
1994. AISI is a member of that organization and employs an ISTAT
Certified and Senior Certified Appraiser.
AISI defines a base value as that of a transaction
between an equally willing and informed buyer and seller,
neither under compulsion to buy or sell, for a single unit cash
transaction with no hidden value or liability, with supply and
demand of the sale item roughly in balance and with no event
which would cause a short term change in the market. Base values
are typically given for aircraft in new condition,
average half-life condition, or adjusted
for an aircraft in a specifically described condition at a
specific time. An average aircraft is an operable
airworthy aircraft in average physical condition and with
average accumulated flight hours and cycles, with clear title
and standard unrestricted certificate of airworthiness, and
registered in an authority which does not represent a penalty to
aircraft value or liquidity, with no damage history and with
inventory configuration and level of modification which is
normal for its intended use and age. Note that a stored aircraft
is not an average aircraft. AISI assumes average
condition unless otherwise specified in this report.
Headquarters:
26072 Merit Circle, Suite 123, Laguna Hills, CA 92653
TEL:
949-582-8888 FAX:
949-582-8887 E-MAIL:
mail@AISI.aero
10 March 2011
AISI File
No. A1S013BVO-3
Page - 2 -
AISI also assumes that all airframe, engine and component parts
are from the original equipment manufacturer (OEM) and that
maintenance, maintenance program and essential records are
sufficient to permit normal commercial operation under a strict
airworthiness authority.
Half-life condition assumes that every component or
maintenance service which has a prescribed interval that
determines its service life, overhaul interval or interval
between maintenance services, is at a condition which is
one-half of the total interval.
Full-life condition assumes zero time since overhaul
of airframe, gear, apu, engine overhaul and engine LLPs.
An adjusted appraisal reflects an adjustment from
half life condition for the actual condition, utilization, life
remaining or time remaining of an airframe, engine or component.
It should be noted that AISI and ISTAT value definitions apply
to a transaction involving a single aircraft, and that
transactions involving more than one aircraft are often executed
at considerable and highly variable discounts to a single
aircraft price, for a variety of reasons relating to an
individual buyer or seller.
AISI defines a current market value, which is
synonymous with the older term fair market value as
that value which reflects the real market conditions including
short term events, whether at, above or below the base value
conditions. Assumptions of a single unit sale and definitions of
aircraft condition, buyer/seller qualifications and type of
transaction remain unchanged from that of base value. Current
market value takes into consideration the status of the economy
in which the aircraft is used, the status of supply and demand
for the particular aircraft type, the value of recent
transactions and the opinions of informed buyers and sellers.
Note that for a current market value to exist, the seller may
not be under duress. Current market value assumes that there is
no short term time constraint to buy or sell.
AISI defines a distressed market value as that value
which reflects the real market condition including short term
events, when the market for the subject aircraft is so depressed
that the seller is under duress. Distressed market value assumes
that there is a time constraint to sell within a period of less
than 1 year. All other assumptions remain unchanged from
that of current market value.
None of the AISI value definitions take into account remarketing
costs, brokerage costs, storage costs, recertification costs or
removal costs.
AISI encourages the use of base values to consider historical
trends, to establish a consistent baseline for long term value
comparisons and future value considerations, or to consider how
actual market values vary from theoretical base values. Base
values are less volatile than current market values and tend to
diminish regularly with time. Base values are normally
inappropriate to determine near term values.
10 March 2011
AISI File
No. A1S013BVO-3
Page - 3 -
AISI encourages the use of current market values to consider the
probable near term value of an aircraft when the seller is not
under duress. AISI encourages the use of distressed market
values to consider the probable near term value of an aircraft
when the seller is under duress.
No physical inspection of the Aircraft or their essential
records was made by AISI for the purposes of this report, nor
has any attempt been made to verify information provided to us,
which is assumed to be correct and applicable to the Aircraft.
If more than one aircraft is contained in this report then it
should be noted that the values given are not directly additive,
that is, the total of the given values is not the value of the
fleet but rather the sum of the values of the individual
aircraft if sold individually over time so as not to exceed
demand.
Aircraft adjustments are calculated to account for the
maintenance status of each aircraft as indicated to AISI by the
client in the above reference (a) data and in accordance
with standard AISI methods. Adjustments are calculated only
where there is sufficient information to do so, or where
reasonable assumptions can be made.
Due to limited data provided, all engines are considered to be
in half life condition.
All aircraft are valued in 05 March 2011 million US
dollars.
It is our considered opinion that the sight unseen base values
as of 05 March 2011 of the Aircraft are as follows in Table
I subject to the assumptions, definitions, and disclaimers
herein.
10 March 2011
AISI File
No. A1S013BVO-3
Page - 4 -
Table I
05 March
2011 Million US Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No.
|
|
Aircraft Type
|
|
|
SN
|
|
|
RN
|
|
|
DoM
|
|
|
Engine Type
|
|
|
|
MTOW
|
|
|
|
|
Half Life
Base Value
MUS Dollars
|
|
|
|
05 March
2011
Adjusted
Base Value
MUS Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
737-832
|
|
|
30799**
|
|
|
N3737C***
|
|
|
Nov-00
|
|
|
CFM56-7B24
|
|
|
|
157,200
|
|
|
|
|
20.45
|
|
|
|
20.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
737-832
|
|
|
30382**
|
|
|
N3738B
|
|
|
Dec-00
|
|
|
CFM56-7B24
|
|
|
|
157,200
|
|
|
|
|
20.45
|
|
|
|
20.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
737-832
|
|
|
30541**
|
|
|
N3739P
|
|
|
Dec-00
|
|
|
CFM56-7B24
|
|
|
|
157,200
|
|
|
|
|
20.45
|
|
|
|
20.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
737-832
|
|
|
30800**
|
|
|
N3740C
|
|
|
Dec-00
|
|
|
CFM56-7B24
|
|
|
|
157,200
|
|
|
|
|
20.45
|
|
|
|
20.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
737-832
|
|
|
30487**
|
|
|
N3741S
|
|
|
Jan-01
|
|
|
CFM56-7B24
|
|
|
|
157,200
|
|
|
|
|
22.06
|
|
|
|
22.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
737-832
|
|
|
30835**
|
|
|
N3742C
|
|
|
Feb-01
|
|
|
CFM56-7B24
|
|
|
|
157,200
|
|
|
|
|
22.06
|
|
|
|
22.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
737-832
|
|
|
30836**
|
|
|
N3743H
|
|
|
Feb-01
|
|
|
CFM56-7B24
|
|
|
|
157,200
|
|
|
|
|
22.06
|
|
|
|
22.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
737-832
|
|
|
30837**
|
|
|
N3744F*
|
|
|
May-01
|
|
|
CFM56-7B24
|
|
|
|
157,200
|
|
|
|
|
22.06
|
|
|
|
21.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
737-832
|
|
|
32373**
|
|
|
N3745B*
|
|
|
Jun-01
|
|
|
CFM56-7B24
|
|
|
|
157,200
|
|
|
|
|
22.06
|
|
|
|
22.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
737-832
|
|
|
32374**
|
|
|
N3747D
|
|
|
May-01
|
|
|
CFM56-7B24
|
|
|
|
157,200
|
|
|
|
|
22.06
|
|
|
|
21.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
757-232
|
|
|
27588
|
|
|
N685DA
|
|
|
Mar-95
|
|
|
PW2037
|
|
|
|
232,000
|
|
|
|
|
11.82
|
|
|
|
12.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
757-232
|
|
|
27589**
|
|
|
N686DA
|
|
|
Sep-95
|
|
|
PW2037
|
|
|
|
232,000
|
|
|
|
|
12.32
|
|
|
|
13.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
757-232
|
|
|
27586**
|
|
|
N687DL***
|
|
|
May-98
|
|
|
PW2037
|
|
|
|
232,000
|
|
|
|
|
15.15
|
|
|
|
16.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
757-232
|
|
|
27587
|
|
|
N688DL
|
|
|
May-98
|
|
|
PW2037
|
|
|
|
232,000
|
|
|
|
|
14.65
|
|
|
|
13.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
757-232
|
|
|
27172**
|
|
|
N689DL***
|
|
|
Jun-98
|
|
|
PW2037
|
|
|
|
232,000
|
|
|
|
|
15.15
|
|
|
|
16.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
757-232
|
|
|
27585**
|
|
|
N690DL
|
|
|
Jun-98
|
|
|
PW2037
|
|
|
|
232,000
|
|
|
|
|
15.15
|
|
|
|
14.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
757-232
|
|
|
29724**
|
|
|
N692DL
|
|
|
Sep-98
|
|
|
PW2037
|
|
|
|
232,000
|
|
|
|
|
15.15
|
|
|
|
14.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
757-232
|
|
|
29725
|
|
|
N693DL
|
|
|
Oct-98
|
|
|
PW2037
|
|
|
|
232,000
|
|
|
|
|
14.65
|
|
|
|
13.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
757-232
|
|
|
29726
|
|
|
N694DL
|
|
|
Nov-98
|
|
|
PW2037
|
|
|
|
232,000
|
|
|
|
|
14.65
|
|
|
|
14.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
757-232
|
|
|
29727
|
|
|
N695DL
|
|
|
Dec-98
|
|
|
PW2037
|
|
|
|
232,000
|
|
|
|
|
14.65
|
|
|
|
14.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
757-232
|
|
|
30485
|
|
|
N6714Q
|
|
|
Dec-00
|
|
|
PW2037
|
|
|
|
232,000
|
|
|
|
|
16.64
|
|
|
|
16.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
757-232
|
|
|
30486
|
|
|
N6715C***
|
|
|
Feb-01
|
|
|
PW2037
|
|
|
|
232,000
|
|
|
|
|
17.66
|
|
|
|
17.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
767-332ER
|
|
|
29689
|
|
|
N169DZ
|
|
|
Jun-98
|
|
|
CF6-80C2B6F
|
|
|
|
407,000
|
|
|
|
|
27.29
|
|
|
|
26.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
767-332ER
|
|
|
29690
|
|
|
N171DZ
|
|
|
Sep-98
|
|
|
CF6-80C2B6F
|
|
|
|
407,000
|
|
|
|
|
27.29
|
|
|
|
26.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
767-332ER
|
|
|
29691
|
|
|
N172DZ
|
|
|
Sep-98
|
|
|
CF6-80C2B6F
|
|
|
|
407,000
|
|
|
|
|
27.29
|
|
|
|
26.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
767-332ER
|
|
|
29692
|
|
|
N173DZ
|
|
|
Nov-98
|
|
|
CF6-80C2B6F
|
|
|
|
407,000
|
|
|
|
|
27.29
|
|
|
|
26.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Note: Landing gear maintenance
on these Aircraft scheduled for March 2011 is valued as
completed. |
** |
|
Note: These aircraft are valued
with installed winglets. |
*** |
|
Note: Airframe maintenance on
these Aircraft scheduled for March 2011 is valued as
completed. |
10 March 2011
AISI File
No. A1S013BVO-3
Page - 5 -
Unless otherwise agreed by Aircraft Information Services, Inc.
(AISI) in writing, this report shall be for the sole use of the
client/addressee. AISI consents to the inclusion of this
appraisal report dated 10 March 2011 in the client
Prospectus Supplement and to the inclusion of AISIs name
in the Prospectus Supplement under the caption
Experts. This report is offered as a fair and
unbiased assessment of the subject aircraft. AISI has no past,
present, or anticipated future interest in any of the subject
aircraft. The conclusions and opinions expressed in this report
are based on published information, information provided by
others, reasonable interpretations and calculations thereof and
are given in good faith. AISI certifies that this report has
been independently prepared and it reflects AISIs
conclusions and opinions which are judgments that reflect
conditions and values current at the time of this report. The
values and conditions reported upon are subject to any
subsequent change. AISI shall not be liable to any party for
damages arising out of reliance or alleged reliance on this
report, or for any partys action or failure to act as a
result of reliance or alleged reliance on this report.
Sincerely,
AIRCRAFT INFORMATION
SERVICES, INC.
Fred Bearden
CEO
1295
Northern Boulevard
Manhasset, New York 11030
(516) 365-6272
Fax
(516) 365-6287
March 16,
2011
Delta Air Lines, Inc.
1030 Delta Blvd.
Atlanta, GA
30354-1989
Ladies & Gentlemen:
In response to your request, BK Associates, Inc. is pleased to
provide our opinion regarding the current Base Values (BV) as of
March 1, 2011 for 26 Boeing aircraft in the Delta Air Lines
Fleet (the
2011-1
EETC). The aircraft include B737, B757 and B767 aircraft in
service with Delta Air Lines. Our opinion of the values is
included in the attached Figure 1 along with the identification
of each aircraft by manufacturers serial number, date of
manufacture, engine model and maximum takeoff weight.
Our values presented in Figure 1 include both a half-time value
as well as a maintenance-adjusted value, which includes
appropriate financial adjustments based on our interpretation of
the maintenance summary and fleet utilization data you provided.
The adjustments are approximate, based on industry average
costs, and normally would include an adjustment for the time
remaining to a C check, time remaining to a
D check (in this case they are referred to as the
Package Service Visit (PSV) and Heavy Maintenance Visit (HMV)),
and time remaining to landing gear overhaul. No adjustments are
added for the engines, which are assumed to be at half-time.
DEFINITIONS
According to the International Society of Transport Aircraft
Tradings (ISTAT) definition of Base Value, to which BK
Associates subscribes, the base value is the Appraisers
opinion of the underlying economic value of an aircraft in an
open, unrestricted, stable market environment with a reasonable
balance of supply and demand, and assumes full consideration of
its highest and best use. An aircrafts base
value is founded in the historical trend of values and in the
projection of future value trends and presumes an arms
length, cash transaction between willing, able and knowledgeable
parties, acting prudently, with an absence of duress and with a
reasonable period of time available for marketing. The base
value normally refers to a transaction involving a single
aircraft.
March 16, 2011
Page 2
When multiple aircraft are acquired in the same transaction, the
trading price of each unit may be discounted.
MARKET DISCUSSION & METHODOLOGY
As the definition implies, the base value is determined from
long-term historical trends. BK Associates has accumulated a
database of over 10,000 data points of aircraft sales that
occurred since 1970. From analysis of these data we know, for
example, what the average aircraft should sell for as a
percentage of its new price, as well as the high and low values
that have occurred in strong and weak markets.
Based on these data, we have developed relationships between
aircraft age and sale price for wide-bodies, narrow-bodies,
large turboprops and, more recently, regional jet and freighter
aircraft. Within these groups we have developed further
refinements for such things as derivative aircraft, aircraft
still in production versus aircraft no longer in production, and
aircraft early in the production run versus later models. Within
each group variations are determined by the performance
capabilities of each aircraft relative to the others. We now
track some 150 different variations of aircraft types and models
and determine current and forecast base values. These
relationships are verified, and changed or updated if necessary,
when actual sales data becomes available.
This relationship between sales price as a function of age and
the original price is depicted in the figure on the following
page. We have not updated these data since 2008. There has been
a dearth of reliable transaction data as the market is becoming
increasingly sensitive to the confidentiality of transaction
prices. In fact, for some reason, most of the transaction data
we become privy to are for new aircraft or very old aircraft
going to scrap. We dont want to risk distorting the shape
of the historical curve.
The last time we did update the data in the figure we included
sales that occurred between 2004 and 2008, and the result was an
almost imperceptible change in the shape of the overall curve,
as would be expected for that large a data sample covering
almost 40 years. However, it did change noticeably in the
later years beyond year 15 where the average values were down
five to seven percent. With several exceptions, for the most
part the aircraft in the
2011-1 EETC
are too young to be affected by this. The average age of the
aircraft is 11 years and the oldest is 16 years.
Experience has shown that new, popular and successful aircraft
tend to retain value above that suggested by the
average line in the figure.
March 16, 2011
Page 3
The current half-time base values are largely based on
comparison to the historical data. If we consider B737-800
N3737C, for example, which at 10 years is about the average
age of aircraft in the
2011-1 EETC,
the data in the figure suggest on average it should sell for
about 45 percent of its new price. Considering its new
price was about $41 million, the data suggest after
allowing for inflation it should sell for about
$24.25 million today. However, as noted above, popular and
successful aircraft tend to have values above the line,
especially in the first 10 years. We concluded the current
half-time base value was $27.10 million.
A similar methodology was used to determine the half-time base
value of each of the other aircraft.
The B757 was very successful in its day but is now out of
production after a long production run. We conclude the
B757-200s considering their specs low takeoff
weight, non-ETOPS but some with winglets - are below the
average suggested by the historical data at $14.7 to
$19.05 million. Similarly,
March 16, 2011
Page 4
while the B767-300ER has been and still is very successful, it
is nearing the end of the production run after 20 years. We
conclude its base values range from $41.1 to $42.2 million.
It is the convention in aircraft appraisals for comparison
purposes, to use the above methodology to determine the
half-time value of an aircraft. That is the value of
the aircraft that is half-way between its major expensive
maintenance events. With the large size of the data sample, it
is assumed that the average historical values are half-time.
These values are adjusted further from the average suggested by
the historical comparison to reflect differences in engine model
and the addition of blended winglets.
These half-time values are adjusted with an appropriate
financial adjustment to reach the maintenance-adjusted values.
These adjustments are based on our assessment of industry
average costs and may not be the same as Deltas cost.
Another buyer of the aircraft may have to have the work done
elsewhere at a different cost. Note, as mentioned earlier, no
adjustment is made for the engines. They are assumed to be at
half-time.
ASSUMPTIONS & DISCLAIMER
It should be understood that BK Associates has neither inspected
the Aircraft nor the maintenance records, but has relied upon
the information provided by you and in the BK Associates
database. The assumptions have been made that all Airworthiness
Directives have been complied with; accident damage has not been
incurred that would affect market values; and maintenance has
been accomplished in accordance with a civil airworthiness
authoritys approved maintenance program and accepted
industry standards. Further, we have assumed unless otherwise
stated, that the Aircraft is in typical configuration for the
type and has accumulated an average number of hours and cycles.
Deviations from these assumptions can change significantly our
opinion regarding the values.
BK Associates, Inc. has no present or contemplated future
interest in the Aircraft, nor any interest that would preclude
our making a fair and unbiased estimate. This appraisal
represents the opinion of BK Associates, Inc. and reflects our
best judgment based on the information available to us at the
time of preparation and the time and budget constraints imposed
by the client. It is not given as a recommendation, or as an
inducement, for any financial transaction and further, BK
Associates, Inc. assumes no responsibility or legal liability
for any action taken or not taken by the addressee, or any other
party, with regard to the appraised equipment. By accepting this
appraisal, the addressee agrees that BK Associates, Inc. shall
bear no such responsibility or legal liability.
This appraisal is prepared
for the use of the
March 16, 2011
Page 5
addressee and shall not be provided to other parties without the
express consent of the addressee. BK Associates, Inc. consents
to the inclusion of this appraisal report dated March 16,
2011 in the Prospectus Supplement and to the references to BK
Associates, Inc.s name in the Prospectus Supplement under
the caption Experts.
Sincerely,
BK ASSOCIATES, INC.
John F. Keitz
President
ISTAT Senior Certified Appraiser
and Appraiser Fellow
JFK/kf
Attachment
Figure
1
DELTA AIR LINES, INC.
2011-1
EETC
VALUES IN $ MILLIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIRCRAFT
|
|
|
|
SERIAL
|
|
|
|
MFGR.
|
|
|
|
MTOW
|
|
1/2 time
|
|
Mt. Adj.
|
|
|
TYPE
|
|
Winglets
|
|
NUMBER
|
|
REGIST.
|
|
DATE
|
|
ENGINE
|
|
Lbs.
|
|
BV
|
|
BV
|
|
1
|
|
737-832
|
|
Yes
|
|
30799**
|
|
N3737C
|
|
November 2000
|
|
CFM56-7B24
|
|
|
157,200
|
|
|
|
27.100
|
|
|
|
27.156
|
|
2
|
|
737-832
|
|
Yes
|
|
30382
|
|
N3738B
|
|
December 2000
|
|
CFM56-7B24
|
|
|
157,200
|
|
|
|
27.100
|
|
|
|
27.177
|
|
3
|
|
737-832
|
|
Yes
|
|
30541
|
|
N3739P
|
|
December 2000
|
|
CFM56-7B24
|
|
|
157,200
|
|
|
|
27.100
|
|
|
|
27.189
|
|
4
|
|
737-832
|
|
Yes
|
|
30800
|
|
N3740C
|
|
December 2000
|
|
CFM56-7B24
|
|
|
157,200
|
|
|
|
27.100
|
|
|
|
27.207
|
|
5
|
|
737-832
|
|
Yes
|
|
30487
|
|
N3741S
|
|
January 2001
|
|
CFM56-7B24
|
|
|
157,200
|
|
|
|
27.600
|
|
|
|
27.679
|
|
6
|
|
737-832
|
|
Yes
|
|
30835
|
|
N3742C
|
|
February 2001
|
|
CFM56-7B24
|
|
|
157,200
|
|
|
|
27.600
|
|
|
|
27.690
|
|
7
|
|
737-832
|
|
Yes
|
|
30836
|
|
N3743H
|
|
February 2001
|
|
CFM56-7B24
|
|
|
157,200
|
|
|
|
27.600
|
|
|
|
27.673
|
|
8
|
|
737-832
|
|
Yes
|
|
30837***
|
|
N3744F
|
|
May 2001
|
|
CFM56-7B24
|
|
|
157,200
|
|
|
|
28.100
|
|
|
|
28.156
|
|
9
|
|
737-832
|
|
Yes
|
|
32373***
|
|
N3745B
|
|
June 2001
|
|
CFM56-7B24
|
|
|
157,200
|
|
|
|
28.100
|
|
|
|
28.161
|
|
10
|
|
737-832
|
|
Yes
|
|
32374
|
|
N3747D
|
|
May 2001
|
|
CFM56-7B24
|
|
|
157,200
|
|
|
|
28.100
|
|
|
|
28.036
|
|
11
|
|
757-232
|
|
No
|
|
27588
|
|
N685DA
|
|
March 1995
|
|
PW2037
|
|
|
232,000
|
|
|
|
14.700
|
|
|
|
15.189
|
|
12
|
|
757-232
|
|
Yes
|
|
27589
|
|
N686DA
|
|
September 1995
|
|
PW2037
|
|
|
232,000
|
|
|
|
16.000
|
|
|
|
17.181
|
|
13
|
|
757-232
|
|
Yes*
|
|
27586**
|
|
N687DL
|
|
May 1998
|
|
PW2037
|
|
|
232,000
|
|
|
|
18.000
|
|
|
|
19.052
|
|
14
|
|
757-232
|
|
No
|
|
27587
|
|
N688DL
|
|
May 1998
|
|
PW2037
|
|
|
232,000
|
|
|
|
17.000
|
|
|
|
15.975
|
|
15
|
|
757-232
|
|
Yes
|
|
27172**
|
|
N689DL
|
|
June 1998
|
|
PW2037
|
|
|
232,000
|
|
|
|
18.000
|
|
|
|
19.110
|
|
16
|
|
757-232
|
|
Yes
|
|
27585
|
|
N690DL
|
|
June 1998
|
|
PW2037
|
|
|
232,000
|
|
|
|
18.000
|
|
|
|
17.043
|
|
17
|
|
757-232
|
|
Yes
|
|
29724
|
|
N692DL
|
|
September 1998
|
|
PW2037
|
|
|
232,000
|
|
|
|
18.200
|
|
|
|
17.386
|
|
18
|
|
757-232
|
|
No
|
|
29725
|
|
N693DL
|
|
October 1998
|
|
PW2037
|
|
|
232,000
|
|
|
|
17.200
|
|
|
|
16.418
|
|
19
|
|
757-232
|
|
No
|
|
29726
|
|
N694DL
|
|
November 1998
|
|
PW2037
|
|
|
232,000
|
|
|
|
17.400
|
|
|
|
16.746
|
|
20
|
|
757-232
|
|
No
|
|
29727
|
|
N695DL
|
|
December 1998
|
|
PW2037
|
|
|
232,000
|
|
|
|
17.400
|
|
|
|
16.810
|
|
21
|
|
757-232
|
|
No
|
|
30485
|
|
N6714Q
|
|
December 2000
|
|
PW2037
|
|
|
232,000
|
|
|
|
18.800
|
|
|
|
18.787
|
|
22
|
|
757-232
|
|
No
|
|
30486**
|
|
N6715C
|
|
February 2001
|
|
PW2037
|
|
|
232,000
|
|
|
|
19.050
|
|
|
|
19.093
|
|
23
|
|
767-332ER
|
|
No
|
|
29689
|
|
N169DZ
|
|
June 1998
|
|
CF6-80C2B6F
|
|
|
407,000
|
|
|
|
41.100
|
|
|
|
40.192
|
|
24
|
|
767-332ER
|
|
No
|
|
29690
|
|
N171DZ
|
|
September 1998
|
|
CF6-80C2B6F
|
|
|
407,000
|
|
|
|
41.650
|
|
|
|
40.874
|
|
25
|
|
767-332ER
|
|
No
|
|
29691
|
|
N172DZ
|
|
September 1998
|
|
CF6-80C2B6F
|
|
|
407,000
|
|
|
|
41.650
|
|
|
|
40.878
|
|
26
|
|
767-332ER
|
|
No
|
|
29692
|
|
N173DZ
|
|
November 1998
|
|
CF6-80C2B6F
|
|
|
407,000
|
|
|
|
42.200
|
|
|
|
41.519
|
|
|
|
|
*
|
|
Winglet installation in progress;
aircraft valued with winglets installed.
|
**
|
|
Airframe maintenance on these
aircraft scheduled for March 2011 is valued as completed.
|
***
|
|
Landing gear maintenance on these
aircraft scheduled for March 2011 is valued as completed.
|
aviation
consulting
Extended
Desktop Appraisal Of:
Twenty-six
(26) Aircraft of Three (3) Types
Client:
Delta Air Lines, Inc.
Date:
March 15, 2011
Washington
D.C.
2101
Wilson Boulevard
Suite 1001