Delta Airlines 2005 Annual Report Download - page 45

Table of Contents
circumstances, to impose a significant holdback of our receivables, including for tickets purchased using an American Express credit
card but not yet used for travel.
As required by the Modification Agreement, on September 16, 2005, we used a portion of the proceeds of our initial borrowing
under the DIP Credit Facility to repay the outstanding principal amount of $500 million, together with interest thereon, that we had
previously borrowed from Amex under the Amex Pre-Petition Facility. Simultaneously, we borrowed $350 million from Amex
pursuant to the terms of the Amex Post-Petition Facility. The amount borrowed under the Amex Post-Petition Facility will be credited,
in equal monthly installments, towards Amex's actual purchases of SkyMiles during the 17-month period commencing in July 2006.
Any unused prepayment credit will carryover to the next succeeding month with a final repayment date for any then outstanding
advances no later than November 30, 2007. Prior to March 27, 2006, the outstanding advances bore a fee, equivalent to interest, at a
rate of LIBOR plus a margin of 10.25%. As the date of effectiveness of the Amended and Restated DIP Credit Facility, to which
Amex consented, the fee on outstanding advances decreased to a rate of LIBOR plus a margin of 8.75%.
On October 7, 2005, Amex consented to an amendment to the DIP Credit Facility in return for a prepayment of $50 million under
the Amex Post-Petition Facility. The prepayment will be credited in inverse order of monthly installments during the 17-month period
commencing in July 2006.
Our obligations under the Amex Post-Petition Facility are guaranteed by the Guarantors of the DIP Credit Facility. Our obligations
under certain of our agreements with Amex, including our obligations under the Amex Post-Petition Facility, the SkyMiles
Agreements and the agreement pursuant to which Amex processes travel and other purchases made from us using Amex credit cards
("Card Services Agreement"), and the corresponding obligations of the Guarantors, are secured by (1) a first priority lien on our right
to payment from Amex for purchased SkyMiles, our interest in the SkyMiles Agreements and related assets and our right to payment
from Amex under, and our interest in, the Card Services Agreement and (2) a junior lien on the collateral securing the DIP Credit
Facility.
With certain exceptions, the Amex Post-Petition Facility contains affirmative, negative and financial covenants substantially the
same as in the DIP Credit Facility. The Amex Post-Petition Facility contains customary events of default, including cross-defaults to
our obligations under the DIP Credit Facility and to defaults under certain other of our agreements with Amex. The Amex Post-
Petition Facility also includes events of default specific to our business, including upon cessation of 50% or more of our business
operations (measured by net revenue) and other events of default comparable to those in the DIP Credit Facility. Upon the occurrence
of an event of default under the Amex Post-Petition Facility, the loan under the Amex Post-Petition Facility may be accelerated and
become due and payable immediately. An event of default under the Amex Post-Petition facility results in an immediate cross-default
under the Amended and Restated DIP Credit Facility.
The Amended and Restated DIP Credit Facility and the Amex Post-Petition Facility are subject to an intercreditor agreement that
generally regulates the respective rights and priorities of the lenders under each Facility with respect to collateral and certain other
matters.
Sale of ASA
On September 7, 2005, we sold ASA to SkyWest for a purchase price of $425 million. In conjunction with this transaction, we
amended our contract carrier agreements with ASA and SkyWest Airlines, Inc. ("SkyWest Airlines"), a wholly owned subsidiary of
SkyWest, under which those regional airlines serve as Delta Connection carriers. The sale of ASA resulted in an immaterial gain that
is being amortized over the life of our contract carrier agreement with ASA. For additional information on our contract carrier
agreements with ASA and SkyWest Airlines, see Note 10 of the Notes to the Consolidated Financial Statements.
At the closing of our sale of ASA, we received $350 million, representing $330 million of purchase price and $20 million related
to aircraft deposits. As the result of our assumption of our contract carrier agreements with ASA and SkyWest Airlines in our
Chapter 11 proceedings, on November 2, 2005, we received an additional $120 million, consisting of $90 million of deferred purchase
price and $30 million in aircraft deposits. We may receive up to the remaining $5 million of deferred purchase price depending on
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