Quote:
Originally Posted by Carl Spackler
And by the way NWA has a market cap that is very close to DAL even though NWA is 2/3 the size of Delta. This in spite of the fact that NWA has an underfunded pension plan hurting its net worth. A hurt that Delta does not have. It really says a lot for the value of the company DAL will be merging with.
Actually, Carl, that says more about DAL than NWA. Since the merger has been announced, NWA simply trades as a proxy to DAL shares, discounted in consideration that the merger may not occur. Considering the conversion ratio is 25% over DAL price, but NWA is only trading at 18.5% above, shows that absent the merger, NWA shares would trade lower. That is in no small part due to the realization that NWA would have a more challenging time funding their pensions as a stand alone.
Quote:
Originally Posted by Carl Spackler
Yes. If you post a reference for your 10% and 8.85% number, I'll send you a nice Pineapple upside down cake.
The reference for the 10% loss is the fact that the S&P and DOW are both down about 35% YTD, and even if the NWA pension is only 50% invested in stocks, its likely down that much so far this year. As for the 8.85% assumed rate of return, here's a cut from the Pension Protection Act.
"Section 402. Special funding rules for plans maintained by commercial airlines that are amended to cease future benefit accruals.
The proposal includes relief for the airlines. Airlines can choose to amortize over 10 years rather than 7 years. Alternatively, for plans that freeze accruals they can use a 17-year amortization and an 8.85% amortization interest rate."
I'll take that cake now, thank you very much.
PG