Northwest Tries New Direction

Northwest intends to issue about 278 million shares, with most of them going to creditors, who are expected to recover about 68% to 85% of the value of their claims. The current stock will be canceled.

Like Northwest, Delta(DAL) filed for bankruptcy protection on Sept. 14, 2005. Delta emerged on April 30. Its shares, which began trading May 3 at $21.75, have fallen about 12%.

CreditSights analyst Roger King noted that shares in both Delta and United(UAUA) declined after post-bankruptcy trading began, and he said Northwest's plan of disclosure valuing its stock at $27 was high.

"The industry's weak post-confirmation equity performance continues with NWA," King wrote in a recent report. "Most of this is due to perennially optimistic pro forma projections inserted in the various plans of reorganization."

Meanwhile, Standard & Poor's analyst Philip Baggaley said in a recent report that Northwest "will exit bankruptcy with an improved operating cost structure and reduced debt and lease obligations" and that "it is currently among the most profitable U.S. carriers." Additionally, he said, its projections rely mostly on cost cuts already in place, rather than on revenue gains.

However, Baggaley said, Northwest reduced its fully adjusted debt, including pensions and other retiree liabilities, by less than 25%. The reduction was higher at Delta, he said.