$474 million of pass-through certificates rated
New York, November 15, 2010 -- Moody's Investors Service assigned a Baa2 rating to the $474 million
of Class A Pass Through Certificates of the 2010-2 Pass Through
Trust (the "Certificates") to be issued by Delta Air Lines, Inc.
The Class A Equipment Notes ("Notes") issued by Delta and acquired with
the proceeds of the Certificates will be the primary assets of the Pass
Through Trust. The Certificates' proceeds will finance 28 aircraft,
ten of which are presently financed by Delta's 2001-1 Enhanced
Equipment Trust Certificates ("EETC's"); ten serve as collateral
for various third party financing agreements and eight are presently unencumbered.
The 2001-1 EETC matures in September 2011; the third-party
financings have various maturity dates between 2015 and 2021.
The transaction documentation provides for the possible issuance of a
subordinated B tranche of certificates at any time. The subordination
provisions of the inter-creditor agreement provide for the payment
of interest on the Class B Certificates, if issued, before
payments of principal on the Class A Certificates. Amounts due
under the Certificates will, in any event, be subordinated
to any amounts due on the Class A Liquidity Facility ("Liquidity Facility").
The ratings of the Certificates consider the credit quality of Delta as
obligor under the Notes, Moody's opinion of the collateral protection
of the Notes, the credit support of the Liquidity Facility,
and certain structural characteristics of the Notes such as the cross-collateralization
and cross-default provisions and the protections of Section 1110
of Title 11 of the United States Code (the "Code"). The assigned
rating reflects Moody's opinion of the ability of the Pass Through Trustees
to make timely payment of interest and the ultimate payment of principal
at a date no later than the Final Legal Distribution date of November
23, 2020. Ten aircraft models spanning seven types comprise
the collateral. The average and median ages of the aircraft are
10 and 9.5 years, respectively. Moody's believes
that under a reorganization scenario, the probability of Delta disaffirming
its obligations under the related equipment notes of the 2010-2
EETC would be greater than that of the other three Delta EETC's
that provide cross-default and cross-collateralization of
the underlying equipment notes. This is because of the few number
of many models of aircraft in this transaction. Nevertheless,
Moody's concluded that a loan-to-value of below sixty
percent provides sufficient cushion to support a Baa2 rating. The
cross-collateralization of the equipment notes should enhance the
recovery for investors in the event of the rejection of the aircraft by
Delta in the event of a bankruptcy filing by it and pursuant to the provisions
of the Code or in the event of a default on the Certificates.
Any combination of future changes in the underlying credit quality or
ratings of Delta, unexpected material changes in the value of the
aircraft pledged as collateral, and/or changes in the status or
terms of the liquidity facilities or the credit quality of the liquidity
provider could cause Moody's' to change its ratings of the Certificates.
General Structure of the Series 2010-2 EETC
The proceeds of the Certificates will initially be held in escrow and
deposited with the Depositary, The Bank of New York Mellon (short-term
rating of P-1), until the issuance of each of the twenty-eight
Notes. The interest on these funds will be sufficient to pay accrued
interest on the outstanding Certificates during the Deposit Period which
expires on or before October 31, 2011.
The collateral pool consists of the following 28 aircraft as follows:
(i) two 2009 vintage B737-700's;
(ii) six 2000 vintage B737-800's;
(iii) six 1996 and one 2001 vintage B757-200's;
(iv) three 2003 vintage B757-300's;
(v) three 2000 vintage B767-300ERs
(vi) one 2009 vintage B777-200LR;
(vii) one 2003 vintage A320-200;
(viii) one 2004 vintage A330-200;
(ix) one 2005 vintage A330-300;
(x) and two 1996 and one 1997 vintage MD-90-30's.
The Certificates issued to finance the aircraft are not obligations of,
nor are they guaranteed by Delta. However, the amounts payable
by Delta under the Notes will be sufficient to pay in full all interest
and principal on the Certificates when due. The Notes will be secured
by a perfected security interest in the aircraft. It is the opinion
of counsel to Delta that the Notes will be entitled to the benefits of
Section 1110 of the U.S. Bankruptcy Code. Scheduled
interest payments on the Certificates will be supported by the Liquidity
Facility sized to pay up to three respective consecutive semi-annual
interest payments in the event Delta defaults on its obligations under
the Notes. The liquidity facilities do not provide for payments
of principal due, nor on interest on the Certificate proceeds held
in escrow during the Deposit Period. Natixis S.A.
via its New York Branch (Moody's short-term rating of P-1)
will provide the Liquidity Facility. The liquidity provider has
a priority claim on proceeds from liquidation of the aircraft or the Notes
and other Trust collateral ahead of any of the holders of the Certificates
and is also the controlling party following a default under the Notes.
The ratings of the 2010-2 Certificates benefit from the cross-collateralization
of the Notes, a feature which Moody's believes can enhance recovery
in the event of a default. The structure provides that for each
aircraft sold following a default, the excess of sale proceeds above
the payoff of the related equipment note are made available to cover shortfalls
due under any other equipment note related to the sale of any other aircraft.
Importantly, following a default, all excess proceeds are
retained until the settlement at maturity of the last of the 28 equipment
notes or the indentures are cancelled.
Moody's considers the number of aircraft and the number of different aircraft
models that comprise the collateral pool when assessing the benefit of
a cross-collateralized EETC. At 28 aircraft covering nine
different models, the collateral pool is sizeable and diverse.
A majority of the included models are utilized on a mix of Delta's
domestic and longer-haul international routes but do not constitute
a significant concentration in any particular aircraft type within its
combined mainline fleet.
The last rating action was on June 28, 2010 when Moody's assigned
a Baa2 rating to Delta's 2010-1 EETC.
The principal methodologies used in this rating were Global Passenger
Airlines published in March 2009, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
..Issuer: Delta Air Lines, Inc.
....Senior Secured Enhanced Equipment Trust,
Delta Air Lines, Inc., headquartered in Atlanta,
Georgia, is the world's largest airline, providing scheduled
air transportation for passengers and cargo throughout the U.S.
and around the world.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
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on the issuer or obligation satisfactory for the purposes of assigning/maintaining
a credit rating.
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Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
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Please see the ratings disclosure page on our website www.moodys.com
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Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Michael J. Mulvaney
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns Baa2 rating to Delta's 2010-2 EETC
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