What is the primary impact of Delta's bankruptcy on American Express?

The primary impact is the restructuring of financial arrangements. Delta will repay $500 million in past advances and American Express will provide $350 million in new post-petition financing. Delta also intends to continue its co-brand, Membership Rewards, and card acceptance agreements with American Express, which is crucial for ongoing revenue.

How is American Express' $350 million loan to Delta structured?

The $350 million loan is structured as a post-petition debtor-in-possession (DIP) facility. It is essentially an advance against American Express' future obligations to purchase Delta SkyMiles reward points. The loan will be secured by specific Delta assets related to their partnership and by subordinate liens on other Delta assets. It is set to amortize over 17 months beginning July 2006, and is subject to bankruptcy court approval.

What is the significance of the $500 million repayment from Delta?

The $500 million represents the aggregate amount American Express Travel Related Services Company, Inc. (TRS) had advanced to Delta in late 2004 and early 2005 as prepayment for Delta SkyMiles reward points. Delta's agreement to repay this sum is a positive development, reducing American Express' exposure from these prior advances.

Does American Express expect the Delta partnership to continue?

Yes, Delta has filed a motion with the Bankruptcy Court to assume its existing co-brand, Membership Rewards, and card acceptance agreements with American Express. This indicates an intention for the partnership to continue under the terms previously negotiated, which is vital for American Express' ongoing business related to Delta.

AXP 8-K: Regulation FD — Sep 16, 2005

Summary

This 8-K filing from American Express (AXP) on September 15, 2005, discloses significant developments related to Delta Air Lines' voluntary Chapter 11 bankruptcy filing on September 14, 2005. American Express has reached an agreement-in-principle with Delta to restructure their financial arrangements, including those related to co-brand, Membership Rewards, and card acceptance agreements. A key aspect is Delta's agreement to repay $500 million in advances made by American Express for the purchase of Delta SkyMiles reward points.

Key Highlights

1Delta Air Lines filed for Chapter 11 bankruptcy on September 14, 2005.
2American Express and Delta have an agreement-in-principle to restructure financial arrangements.
3Delta will repay $500 million in advances from American Express for SkyMiles reward points.
4American Express will provide Delta with $350 million in post-petition debtor-in-possession (DIP) financing, secured by specific Delta assets and subordinate liens on others.
5This $350 million DIP facility is structured as an advance against future purchases of Delta SkyMiles reward points and will amortize over 17 months starting July 2006.
6Delta seeks court authorization to assume co-brand, Membership Rewards, and card acceptance agreements with American Express.
7The AXP co-brand Delta SkyMiles Credit Card portfolio represents less than 10% of AXP's worldwide billed business.

AMERICAN EXPRESS CO 8-K Report, Regulation FD Disclosure (Sep 16, 2005)

Summary

Key Highlights

Frequently Asked Questions