Hedge Fund’s Wings Clipped In Delta Battle

Oct 26 2007 | 8:08am ET

A hedge fund’s effort to restrict what bankrupt Delta Air Lines can do just won’t fly, a judge has ruled.

Contrarian Capital Management and six other investment firms holding unsecured claims against a Delta subsidiary had sought to limit the airline’s ability to change financing deals on its aircraft. The claimants complained that a settlement between Comair and the financiers of 37 of its aircraft boosted unsecured claims against the company from $800 million to $1.05 billion.

“In just seven short weeks…the expected recovery of the Comair debtors’ unsecured creditors has plummeted by more than 20%,” the firms said in court filings this summer. But this week a judge called their effort too little, too late.

U.S. Bankruptcy Judge Adlai Hardin noted that creditors approved Delta’s Chapter 11 plan last year and didn’t object to the terms allowing renegotiations, and “are barred from doing so now.” Hardin ruled that granting the firms’ request to limit Delta’s bargaining room would necessitate a “rewrite of all these explicit provisions in the plan.”

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