Delta Airlines 2005 Annual Report Download - page 43

Table of Contents
due 2005 for newly issued unsecured 8.0% Senior Notes due in December 2007. During 2003, we recorded a
$15 million loss from our purchase of a portion of the Delta Family-Care Savings Plan's Series C Guaranteed Serial
ESOP Notes, offset by a $15 million gain related to a debt exchange.
Income Tax Provision (Benefit)
During 2004, we recorded an additional valuation allowance against our net deferred income tax assets, which resulted in a
$1.2 billion non-cash charge to income tax expense on our Consolidated Statement of Operations. For additional information about the
income tax valuation allowance, see Note 11 of the Notes to the Consolidated Financial Statements.
Financial Condition and Liquidity
The matters described herein, to the extent that they relate to future events or expectations, may be significantly affected by our
Chapter 11 proceedings. Those proceedings will involve, or may result in, various restrictions on our activities, limitations on
financing, the need to obtain Bankruptcy Court and Creditors Committee approval for various matters and uncertainty as to
relationships with vendors, suppliers, customers and others whom we may conduct or seek to conduct business.
Significant Liquidity Events
Debtor-in-Possession Financing
On September 16, 2005, we entered into the DIP Credit Facility, which permits us to borrow up to $1.9 billion from a syndicate of
lenders arranged by GECC and Morgan Stanley Senior Funding, Inc. ("Morgan Stanley"), for which GECC acts as administrative
agent. The Bankruptcy Court approved our entering into the DIP Credit Facility.
The DIP Credit Facility consists of a $600 million Term Loan A arranged by GECC (the "TLA"), a $700 million Term Loan B
arranged by GECC (the "TLB") and a $600 million Term Loan C arranged jointly by GECC and Morgan Stanley (the "TLC;" together
with the TLA and TLB, collectively, the "DIP Loans"). We applied a portion of these proceeds to (1) repay in full the $480 million
principal amount outstanding under the GE Pre-Petition Facility; (2) repay in full the $500 million principal amount outstanding under
our Amex Pre-Petition Facility; and (3) prepay $50 million of the $350 million principal amount outstanding under our Amex Post-
Petition Facility. The remainder of the proceeds of the DIP Loans is available for our general corporate purposes.
Availability of funds under the TLA is subject to a borrowing base calculation. If the outstanding amount of the TLA at any time
exceeds the borrowing base, we must immediately repay the TLA or post cash collateral in an amount equal to the excess.
The TLA, TLB and TLC each mature on March 16, 2008. Prior to the Amended and Restated DIP Credit Facility (defined below),
the TLA bore interest, at our option, at LIBOR plus 4.50% or an index rate plus 3.75%; the TLB bore interest, at our option, at LIBOR
plus 6.50% or an index rate plus 5.75%; and the TLC bore interest, at our option, at LIBOR plus 9.00% or an index rate plus 8.25%.
We may also request the issuance of up to $200 million in letters of credit under the DIP Credit Facility, which amount must be
fully cash collateralized at all times such letters of credit are outstanding.
Our obligations under the DIP Credit Facility are guaranteed by substantially all of our domestic subsidiaries (the "Guarantors").
We will be required to make certain mandatory repayments of the DIP Loans in the event we sell certain assets, subject to certain
exceptions. Any portion of the DIP Loans that are repaid through either voluntary or mandatory prepayment may not be reborrowed.
The DIP Loans and the related guarantees are secured by first priority liens on substantially all of our and the Guarantors' present
and future assets (including assets that previously secured the GE Pre-Petition Facility) and by junior liens on certain of our and the
Guarantors' other assets (including certain accounts receivable and other assets subject to a first priority lien securing the Amex Post-
Petition Facility described below), in each case subject to certain exceptions, including an exception for assets which are subject to
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