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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 27, 1999
DELTA AIR LINES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-5424 58-0218548
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
Hartsfield Atlanta International Airport, Atlanta, Georgia 30320
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(Address of principal executive offices)
Registrant's telephone number, including area code: (404) 715-2600
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Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
TRANSACTIONS WITH priceline.com INCORPORATED
During August 1998, Delta Air Lines, Inc. ("Delta") entered into an
agreement with priceline.com Incorporated ("priceline") under which ticket
inventory provided by Delta is sold through priceline's Internet-based
e-commerce system. As part of that agreement, Delta received a warrant to
purchase up to 18.6 million shares of priceline common stock for $0.93 per
share. The warrant became exercisable in full on July 25, 1999. On August 17,
1999, Delta partially exercised the warrant and acquired 1.8 million shares of
priceline common stock. Delta immediately resold those shares in a registered
public offering for $67 per share, resulting in a pre-tax gain of $115 million.
In connection with this sale, Delta agreed with the managing underwriter of the
public offering to a lock-up restricting Delta's right to make further sales of
priceline common stock until February 7, 2000.
On November 12, 1999, Delta and priceline amended the terms of the
warrant to allow a "cashless exercise" of the warrant. On the same date, Delta
exercised the warrant with respect to the remaining 16.8 million shares of
priceline common stock in a "cashless exercise" (i.e., Delta paid the exercise
price by surrendering approximately 300,000 shares of priceline common stock it
was entitled to acquire upon exercise). As a result of that exercise, Delta
acquired 16.5 million shares of priceline common stock.
On November 16, 1999, Delta was released from the lock-up with respect
to 2.1 million shares of priceline common stock. On the same date, Delta entered
into an agreement to sell 2.1 million shares of priceline common stock in a
private transaction to Jay S. Walker, priceline's founder and Vice Chairman. The
sale price is $59.93 per share (the closing price of priceline common stock on
November 15, 1999), or an aggregate sale price of $125 million.
On November 17, 1999, Delta and priceline entered into a master
agreement that had the following effects, among others:
(1) Delta and priceline amended their business agreement to permit American
Airlines, United Airlines, USAirways and certain foreign air carriers
to become participating air carriers in priceline;
(2) Delta was released from the lock-up with respect to an additional 8.4
million shares of priceline common stock;
(3) Delta received the right to exchange 6 million shares of priceline
common stock for 6 million shares of newly issued priceline convertible
preferred stock. The convertible preferred stock would (a) have a par
value of $59.93 per share; (b) be convertible into shares of priceline
common stock on a one-for-one basis; (c) bear a dividend of 8% per
annum, payable-in-kind; (d) be subject to mandatory redemption on the
tenth anniversary of the date of issuance; and (e) be callable by
priceline at its par value after three years; and
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(4) Priceline issued to Delta a new warrant to acquire 5.5 million shares
of priceline common stock for $56.625 per share. The warrant may become
exercisable in phases between March 16, 2000 and December 31, 2000 if
certain conditions are met and, to the extent the warrant becomes
exercisable because these conditions are met, the warrant will expire
on November 17, 2004. To the extent the conditions are not met, the
warrant will become exercisable on November 17, 2004 for a period of
six months.
Delta will recognize income on the new warrant based on its fair value.
The convertible preferred stock, the new warrant and the shares of priceline
common stock underlying each of these securities are not registered under the
Securities Act of 1933. Delta has certain demand and piggyback registration
rights with respect to the shares of common stock underlying both the
convertible preferred stock and the warrant.
Between November 18, 1999 and November 26, 1999, Delta sold 5.1 million
shares of priceline common stock for a total sale price of $335.1 million.
For additional information on these subjects, see the third and fourth
amendments to Delta's Schedule 13D relating to priceline which Delta filed with
the Securities and Exchange Commission on November 17 and 18, 1999,
respectively.
ACQUISITION OF COMAIR HOLDINGS, INC.
On October 17, 1999, Delta, Kentucky Sub, Inc., an indirect wholly
owned subsidiary of Delta ("Kentucky Sub"), and Comair Holdings, Inc. ("Comair")
entered into an agreement and plan of merger ("Merger Agreement") providing for
the merger of Kentucky Sub into Comair. Comair is a holding company whose
principal asset is its 100% ownership of Comair, Inc., a certificated regional
jet carrier and a participant in the Delta Connection program. Prior to entering
into the Merger Agreement, Delta beneficially owned approximately 22% of
Comair's outstanding common stock.
Pursuant to the Merger Agreement, Kentucky Sub began a tender offer on
October 22, 1999 to purchase all the outstanding shares of Comair's common stock
(other than shares already beneficially owned by Delta) at a price of $23.50 per
share in cash. As a result of the tender offer, which expired at midnight on
November 19, 1999, Kentucky Sub purchased approximately 65 million shares of
Comair's common stock (representing about 87% of the outstanding shares not
already beneficially owned by Delta prior to the beginning of the tender offer).
This purchase increased Delta's beneficial ownership of Comair's outstanding
common stock to approximately 90%.
The Merger Agreement provides that Kentucky Sub will merge into Comair
as soon as practicable after the purchase of shares under the tender offer and
the satisfaction of certain conditions. At the effective time of the merger (the
date of which has not yet been determined), each outstanding share of Comair's
common stock (other than shares held in the treasury of Comair, shares already
beneficially owned by Delta or shares for which dissenters' rights have been
timely exercised) will be converted into the right to receive $23.50 in cash.
When the merger becomes effective, Kentucky Sub will cease to exist and Comair
and Comair, Inc. will become indirect, wholly owned subsidiaries of Delta.
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On November 22, 1999, Delta entered into a $1.9 billion senior,
unsecured term loan facility with The Chase Manhattan Bank and a group of banks
to finance the tender offer and the merger. The principal terms of the term loan
facility, including the covenants and events of default, are substantially
similar to those contained in Delta's 1997 Bank Credit Agreement (See Note 5 of
the Notes to the Consolidated Financial Statements (pages 46-48) in Delta's 1999
Annual Report to Shareowners).
All borrowings under the term loan facility will mature on November 22,
2001. The interest rate under this facility is, at Delta's option, the alternate
base rate or the Eurodollar rate, in either case plus a margin that varies
between 0% and 1% for alternate base rate borrowings and between 0.75% and 2.00%
for Eurodollar borrowings, depending on Delta's long-term senior unsecured debt
ratings (as established from time to time by Standard & Poor's Ratings Services
and Moody's Investors Service, Inc.). If Delta's long-term senior unsecured debt
is rated below investment grade, Delta will be required to maintain as of the
last day of each fiscal quarter a ratio (determined on a rolling four-quarter
basis) of (1) Consolidated EBITDA (as defined) plus Consolidated Aircraft
Rentals (as defined) to (2) Consolidated Interest Expense (as defined) plus
Consolidated Aircraft Rentals, of not less than 1.5 to 1.
On November 23, 1999, Delta borrowed $1.6 billion under the term loan
facility to fund the purchase of shares in the tender offer. Delta subsequently
reduced the remaining commitment under the term loan facility from $300 million
to $200 million. Delta may borrow the additional $200 million under the term
loan facility in connection with the merger. Delta may prepay the term loan
facility in whole or in part at any time.
B-777 AND B-767-400 PILOT NEGOTIATIONS
In September 1999, Delta and the Negotiating Committee of the Air Line
Pilots Association, International ("ALPA") reached a tentative agreement that,
among other things, sets pilot pay rates and work rules for B-777 and B-767-400
aircraft, subject to the approval of the ALPA Delta Master Executive Council
("MEC") and ratification by Delta pilots. The MEC approved the tentative
agreement in September 1999. On November 29, 1999, ALPA announced that Delta
pilots had ratified the new agreement. Delta and The Boeing Company are
discussing delivery dates for the previously deferred B-777 aircraft.
OTHER MATTERS
On October 27, 1999, a purported class action lawsuit was filed on
behalf of travel agents in North Carolina in the Superior Court of Hanover
County, North Carolina, against various airlines, including Delta. The lawsuit
alleges that, by reducing commissions paid to travel agents in North Carolina,
the defendants have (1) tortiously interfered with the prospective contractual
relationship between travel agents and their customers; (2) engaged in unfair
competition; (3) entered into a conspiracy in restraint of trade; (4)
monopolized or attempted to monopolize the sale of airline tickets; and (5)
breached a fiduciary duty owed to travel agents. The plaintiff, who has
requested a jury trial, seeks to enjoin the defendants from committing unlawful
acts, and to recover unspecified treble damages, punitive damages, attorneys'
fees and costs. Delta believes this lawsuit is without merit and intends to
defend this matter vigorously.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DELTA AIR LINES, INC.
BY: /s/ Edward H. Bastian
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Edward H. Bastian
Vice President and Controller
Date: November 30, 1999
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