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ATLANTA (AP) -- Delta Air Lines Inc. has obtained a commitment for up to $600 million in new financing and has agreed to conditions that require it to get court approval to repay the money even if it files for bankruptcy.
The Atlanta-based airline said Monday it has entered into an agreement with American Express Travel Related Services Company Inc. to provide the financing, subject to certain conditions.
In a late afternoon filing with the Securities and Exchange Commission, Delta said in part the agreement is conditioned on the airline achieving $1 billion in concessions from it pilots. The company and the pilots union agreed to meet into the evening to try to strike a deal.
Delta has warned it will have to file for bankruptcy without the cuts. It has also said it may still have to file for bankruptcy even with the cuts because of its $20.6 billion in debt.
The SEC filing says Delta also has agreed if it seeks Chapter 11 protection to petition the bankruptcy court to approve the financing agreement and give American Express secured claim and superpriority status.
Up to $100 million of the financing will be in the form of a loan from American Express and $500 million of the amount will be in the form of a prepayment of SkyMiles, which is Delta's frequent flier miles program.
Some of the financing would be credited against SkyMiles purchases to be made by American Express. A Delta spokeswoman said she could not elaborate.
The agreement does not say exactly when Delta will receive any of the money. Delta said it is still negotiating terms related to $100 million of the agreement. Another $250 million will be paid by American Express once Delta meets the conditions. The remaining $250 million will be paid at least 90 days after the first installment.
Delta desperately needs cash for its survival. The nation's third-largest airline said it had only $1.45 billion left at the end of the third quarter.
Delta, meanwhile, continued negotiations with its pilots Monday over the concessions the airline says it needs.
"As our September quarter 2004 losses demonstrate, time is now very critical for Delta," said Gerald Grinstein, Delta's chief executive officer. "American Express' role in Delta's transformation process demonstrates the commitment and determination of one of our key stakeholders in helping to restructure the company."
In a memo to pilots late Monday, union spokesman Chris Renkel said the union and company negotiators were meeting in Washington and would continue throughout the evening. Renkel did not elaborate. Another spokesperson, Karen Miller, said she could not elaborate beyond the memo.
The pilots have publicly offered up to $705 million in savings. On Oct. 8, the pilots union made a new proposal to management. It has not said if the offer includes a higher amount of concessions. However, in a regulatory filing a week later, Delta said that to date the union's "counterproposals have been for substantially less than $1 billion." The company also said in the filing that the union was requesting for pilots a stock option program that involves "substantially more equity" than management's proposal.
Share of Delta, which has a hub in Salt Lake City, closed Monday at $3.78, up 54 cents, on the New York Stock Exchange.
(Copyright 2004 by The Associated Press. All Rights Reserved.)