On Friday, with the help of lawyers from Kilpatrick Stockton, Delta Air Lines is slated to close a $450 million deal that raises cash for the company by using 24 of its jets as collateral.

The airline launched the transaction on Tuesday, selling Class A pass-through trust certificates, which are similar to bonds, to underwriters including Goldman Sachs & Co. and Credit Suisse Securities. The underwriters then sell the certificates, primarily to institutional investors. Delta initially will hold the sale proceeds in escrow, according to documents on file with the Securities and Exchange Commission, then will use the pass-through trust to acquire a related series of enhanced equipment trust certificates, or EETCs, a specialized form of financing larger airlines use to fund the purchase of their jets. Delta will pay 6.2 percent for the financing, with a distribution date of 2018.

Delta will net $444.3 million from the deal, after the underwriting fee of $5.6 million is paid.

This is a repeat performance for the Kilpatrick team, led by partner W. Benjamin Barkley and including partner David M. Eaton and associates Adwoa M. Awotwi and Megan K. Callahan, who handled a similar transaction for Delta in November. That one was valued at $688.7 million and carried considerably higher interest rates on its two tranches—7.75 percent and 9.75 percent.

Barkley said he could not comment on the transaction because the DEAL is pending. Delta also was represented by lawyers from Debevoise & Plimpton, serving as the airline's chief finance counsel. Shearman & Sterling represented the underwriters, which, in addition to Goldman and Credit Suisse, are Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Banc of America Securities Inc.

In the current deal, Delta is financing two new Boeing jets the airline received in March, and refinancing 22 other aircraft, which Delta acquired about a decade ago. Those older planes were financed in 2000 under another EETC that matures in November. Because EETCs cannot be paid off early without complications, the proceeds from the current certificate sale will be held in a trust account until this fall, then used to pay off the older jets.

The deal is structured to enhance Delta's ability to market it to investors. As in its November deal, the pass-through trust structure allows investors to cede some duties to a trustee, who distributes interest payments to investors according to their ownership shares and makes decisions for the group about whether to foreclose on an aircraft in the event of default.

If there is a default, Natixis SA, the New York branch of a French investment bank, is serving as a liquidity backstop provider, which, according to Delta's preliminary prospectus supplement, means Natixis will make three semiannual interest payments on the debt if Delta cannot do so.

The financing is secured by jets with a total appraised value of about $839 million, providing a 54 percent loan-to-value ratio. The November deal's loan-to-value ratio, by contrast, was 61 percent—meaning investors in the current deal are getting a bit more security because the equity in the planes is higher, providing more downside protection in the event of the jets' depreciation or if Delta defaults and the planes need to be seized and sold.

That ratio could change if the airline decides it needs more money and issues Class B certificates—roughly equivalent to a second mortgage on the same set of planes—which is something SEC documents say the airline has the option to do.

The prospectus also lists risks associated with the investment, including the volatility of fuel costs; Delta's obligation to post collateral in connection with its fuel hedge contracts—in 2008, "our counterparties required us to fund $1.2 billion of fuel hedge margin," the airline notes in the filing; and Delta's ability to fully realize the expected benefits of its merger with Northwest, for which integration costs of $500 million over three years are anticipated.

Although Delta has packed on debt in recent months, an 8-K filed June 15 says Delta plans to start deleveraging. Citing $1 billion in cashflow from operations and $600 million in free cashflow in the quarter ended in March, the company noted that its unit revenues increased by 8 percent—the first increase since the fourth quarter of 2008.

Delta projected that it would cut its net debt, estimated to be $15 billion at the end of this year, to $10.2 billion by December 2012.

Equifax Inc., represented by Kilpatrick Stockton partner Gregory K. Cinnamon, has agreed to sell its Direct Marketing Services division to Alliance Data Systems for $117 million.

  The all-cash transaction, which Cinnamon said took between 45 and 60 days to put together from a legal standpoint, is expected to close around the beginning of July. 

“Equifax engaged a banker, Wells Fargo, and we ran an auction process for the transaction,” said Cinnamon, who has represented Equifax since 1995. He said Equifax’s general counsel, Kent Mast, along with the company’s  corporate and technology counsel, Jeffrey R. Thorpe, were integral in putting the deal together, as were some Equifax corporate development people. “They had a number of interested parties submit bids.”

Alliance Data, whose in-house attorneys, led by Jeanette Fitzgerald, handled this deal, submitted the winning bid. The Dallas, Texas-based company plans to integrate the about 200 employees it gets from Equifax into its Epsilon Targeting and Marketing Technology groups.

“This was an asset transaction, where [Equifax was] divesting their direct marketing relationship businesses that had been integrated over the years, so pulling that apart was probably the most complex part of the deal,” Cinnamon said. “For Equifax, it was no longer core to their differentiated data business, and for Alliance Data’s business, this was right down the middle of the fairway of what they do.”

Fidelity Southern Corp. is planning to launch a $57.5 million underwritten public offering of its common stock, according to a registration statement filed with the Securities and Exchange Commission on Monday.

James W. Stevens and Christina M. Gattuso of Kilpatrick Stockton represent the underwriters, for which Sandler O’Neill & Partners serves as sole book-running manager, and FIG Partners serves as co-manager.

Fidelity Southern, the holding company for Atlanta-based Fidelity Bank and LionMark Insurance Company, is represented by lawyers from Baker, Donelson, Bearman, Caldwell & Berkowitz’s Memphis office.

According to information from Fidelity, proceeds from the offering will be used to redeem some or all of the preferred shares and warrant held by the U.S. Treasury Department as part of a $48 million loan Fidelity received under the Troubled Asset Relief Program.

United Community Bank has done something a lot of financial institutions might envy: It has sold $103 million of non-performing mortgages and bank-owned properties to an investor at book value and set itself up for a continuing cash infusion from stock sales in the bargain.

One of UCB’s lawyers, James W. Stevens at Kilpatrick Stockton, referred to the complex deal as a “new, new thing … it’s a new form of transaction.”

He said UCB, which is owned by Blairsville-based United Community Banks Inc., the third-largest bank holding company in Georgia, has been a client of the firm’s for more than 20 years. The bank and its lawyers put together a multipart deal, first agreeing to sell about 25 percent of its non-performing assets—primarily residential and commercial loans and other real estate owned properties—to New York-based Fletcher International Inc., represented in this deal by the New York and Palo Alto, Calif., offices of Skadden Arps Slate Meagher & Flom.

“They sold the assets at book value,” Stevens said. “You can move anything if you want to sell at a deep discount … so selling at book value was a big plus for them.”

Another part of the deal was a stock purchase agreement, which gave Fletcher the right to buy $65 million of the holding company’s preferred convertible stock at $1,000 per share, according to an 8-K filed with the Securities and Exchange Commission. Fletcher also gets a warrant in connection with the asset sale allowing it to buy common-stock-equivalent junior preferred stock exercisable up to $30 million. An additional $35 million will be granted if all the preferred stock is purchased.

If Fletcher doesn’t buy all the preferred stock, which is convertible to common stock, by May 2011, it must pay UCB 5 percent of the amount it did not purchase and an additional 5 percent of any amount not purchased by May 2012, according to one of UCB’s 8-K filings.

Another aspect of the deal, according to the SEC filings, was that UCB loaned about $82.4 million of the purchase price, and Fletcher paid $20.6 million in cash. Fletcher also deposited another $18 million with the bank to pre-fund an estimated three years’ of interest, principal amortization and other costs.

“This was something that came together through, honestly, just the persistence and creativity of the officers at United Community Banks,” Stevens said, speaking of CEO Jimmy Tallent, CFO Rex S. Schuette and Chief Risk Officer David Shearrow.

The deal came together quickly. Stevens said discussions began last year, but most of the work was done in a four-to-six-week period this spring thanks to what he jokingly called 12-hour “half-days” of work for the Kilpatrick team, which included Atlanta partners Hilary P. “Hil” Jordan and Richard R. Cheatham, and partner W. Randy Eaddy in Winston-Salem.

The deal needed to move quickly, Stevens said, because the stock aspect requires shareholder approval, and this meant relevant information had to appear in UCB’s April 15 proxy statement to prepare shareholders to vote on May 26.

“There’s a potential issuance of common stock as a result of this transaction in excess of 20 percent of the existing common stock,” he said. If the shareholders don’t approve that potential issuance, he said, “The deal will be capped at 19.99 percent.”

Kilpatrick Stockton’s Gregory K. Cinnamon represented AGL Resources in its decision to sell a telecommunications unit to Louisville, Colo.-based Zayo Group for $71.5 million.

The unit being sold, AGL Networks, is what’s known as a dark-fiber telecommunications business. That means that AGL has laid fiber optic cabling to connect office buildings and other users, but does not provide telecommunications services itself, instead leasing its 795 route miles and 182,000 fiber miles connecting customers in primarily in Atlanta, Phoenix and Charlotte to other providers. This is similar, Cinnamon said, to AGL’s business model in the deregulated gas industry, where the company provides the pipes that transmit gas, but other marketers supply the gas itself.

Cinnamon said that when AGL decided to divest itself of some non-core assets, its financial adviser, SunTrust Robinson Humphrey, ran an auction to sell AGL Networks, attracting several other national and regional companies to the bidding pool.

“It was good to get out and just see an active bidding process for the asset,” Cinnamon said. “There were several people who were interested, and it just goes to show that good assets will always find a home.”

Zayo, which provides telecommunications, Internet and bandwidth infrastructure services in 23 states, is paying cash for AGL Networks. The acquiring company was represented by attorneys from Holme Roberts & Owen in Denver.

Cinnamon said he worked with AGL’s in-house counsel, William A. Palmer III, as well as people on the company’s business side, to negotiate and document the agreement, and to separate AGL Networks from any entanglements with its parent company. The agreement was signed March 23 and is expected to close by the end of the second quarter, pending approval under the Hart Scott Rodino Act and from regulators and third parties.

Kilpatrick Stockton's Ben Barkley got the first draft of the merger agreement memorializing a planned $110 million acquisition of his client, EyeWonder Inc., by Limelight Networks Inc., at 6:30 a.m. on Thanksgiving Day.

“I thought this deal would go to Christmas Eve,” he says now, recalling that he spent hours at his cabin in the North Georgia mountains looking over the 100-plus-page agreement. His team got lucky: The deal closed on Dec. 21—just in time to free up the lawyers for the holiday weekend.

EyeWonder is a privately held Atlanta-based provider of interactive digital advertising technology. The company helps Forbes 2000 companies and smaller advertisers and publishers deliver and track video and various types of interactive ads. One of its products, according to a filing with the Securities and Exchange Commission, is a “pre-game ad product” which offers viewers an interactive video ad while they wait to play online games available on the Cartoon Network and Adult Swim.

Limelight, a public company based in Tempe, Ariz., offers a global infrastructure that allows users to bypass public Internet pathways and gain faster access to content.

The deal, which is expected to close in the first half of 2010, involves a $62 million cash payment, subject to EyeWonder's financial condition and closing, plus about 12.74 million shares of Limelight common stock. It also includes an earn out, Barkley said, which is increasingly common these days, providing that up to 4.86 million additional shares of Limelight common stock will be issuable in 2011 if EyeWonder achieves certain financial results in 2010.

Earn outs “have pretty much been in every M&A deal I've worked on in the last 12 months to two years,” Barkley said. “There's just a lot more perceived value gap out there.”

Barkley said one of the complicating factors of this deal was that EyeWonder had a handful of European subsidiaries that were not wholly owned. In order to move the deal along, he and his team spent a weekend rolling up the companies, working straight through from 9 a.m. on Sunday, Dec. 20, to 9 a.m. on Monday, Dec. 21. During that long day and night, he said, they held a shareholders' meeting at 10 a.m. German time—which was 4 a.m. for him in Atlanta, 2 a.m. for the buyer in Arizona and 1 a.m. for the buyer's attorneys at Wilson Sonsini in California.

“Anytime you have a transaction across that many time zones, the logistics and the hours are a challenge,” he said.

Barkley worked on the transaction with associate Jessica Nash, along with partners Lynn Fowler, Jerry Smith and Jennifer Schumacher.

Kilpatrick Stockton has represented EyeWonder since the company got start-up funding about a decade ago, Barkley said. A former Kilpatrick lawyer, Jerome F. “Romey” Connell Jr., is now EyeWonder's general counsel and chief operating officer, and he contacted Barkley for help with the deal.

“It was really kind of a high-energy deal,” Barkley said, adding that even though his team clocked a lot of hours in difficult negotiations, the Wilson Sonsini lawyers were such a good group that “It makes doing a transaction like that a lot of fun, even if it is 4 o'clock in the morning.”

Equifax Inc., the company known for its analysis of consumer creditworthiness, today closed a $124 million deal to acquire IXI Corp., thanks in part to legal help from Kilpatrick Stockton.

Kilpatrick mergers and acquisitions partner Gregory K. Cinnamon, who served as lead counsel on the deal, said he’s represented Equifax in various transactions over the past 15 years, including the company’s 2008 joint venture with Russian credit information company Global Payments Credit Services.

In the IXI deal, he said, “Intense focus was placed upon the transaction and meeting a tight time scale.”

Prior to the agreement, Equifax and IXI, a privately-held company based in McLean, Va., which collects and analyzes consumer wealth and asset data, had worked together for 18 months.

IXI sells its information to clients in the financial services and consumer marketing sectors. The company says it sources its information through more than 95 banks, brokerage firms and other financial entities, directly measuring data on more than $10 trillion in U.S. consumer assets and investments that represent more than 42 percent of all U.S. consumer-invested assets.

Cinnamon said six to eight other lawyers from three of his firm’s offices also worked on the deal, including Atlanta partners Lynn E. Fowler, who handled tax matters, and Jennifer S. Schumacher, who handled benefits and executive compensation issues.

Cooley Godward Kronish represented IXI; the company’s financial advisers were from Wells Fargo.

Hard on the heels of handling more than $1 billion in financing transactions for Delta Air Lines earlier this month, Kilpatrick Stockton partner Benjamin W. Barkley found himself wondering—in these deal-starved times—what he’d be doing next.

But before he even had time to catch up on his sleep, he was representing longtime client Five Star Food Service in its recapitalization by Navigation Capital Partners. Chattanooga-based Five Star, which provides vending, coffee and food services, has long been a portfolio company for Atlanta-based private equity firm Navigation.

Though financial terms of the deal were not disclosed, Barkley, who worked on the transaction with partner Todd C. Meyers, said, “It was a refinancing, a paying off debt and additional investments. Like everybody else.”

The deal increases Navigation’s majority ownership stake in Five Star, and also makes Five Star a franchisee of Canteen Vending Services, an operating company of Charlotte-based Compass Group North America, according to information from the companies.

Attorneys from Reed Smith represented Navigation in the deal.

Kilpatrick Stockton lawyers served as Delta Air Lines bond counsel in the company’s recent plan for two private debt offerings worth $1 billion.

Partner Benjamin W. Barkley confirmed that he and partner David M. Eaton, along with attorneys in the firm’s tax, employee benefits and environmental groups worked on the deal.

The offerings, which have not yet closed, are structured as high-yield private placements under Rule 144A of the Securities Act. The first $500 million in senior secured notes will be due in 2014; the additional $500 million in second-lien notes will be due in 2015. Both are part of the airline’s plan to refinance some $1.5 billion in debt, including repayment of outstanding debt under Northwest Airlines’ senior corporate credit facility. Delta and Northwest merged last year.

The unusual aspect of the deal, said Barkley, is the way it is secured. Rather than being secured by equipment or airplanes, he said, “These bonds are secured … by Delta’s Pacific route system, so basically it is their authority from the U.S. and Japanese governments to fly to Japan and Asia and places like that; and their slots—the right to fly at a particular time and in a particular airspace; and then their gates, which is the right to fly into a particular space.”

Barkley said Delta used similar securitization when it acquired Northwest. “It’s been done before,” he said, “but it is just sort of unusual.”

Davis Polk & Wardwell in New York also worked on the deal, handling aspects of the loan for Delta.

When AGL Capital Corp. wanted to raise some cash, the Atlanta-based financing arm of gas distributor AGL Resources Inc. tapped Kilpatrick Stockton as its counsel for the second time in two years.

In the most recent deal, a $300 million offering of 10-year senior unsecured notes, Kilpatrick partner David M. Eaton captained the transaction, assisted by securities partners W. Benjamin Barkley and David A. Stockton, tax partner Lynn E. Fowler, and associates Adwoa M. Awotwi, Megan K. Callahan and Jessica L. Nash.

AGL’s internal counsel, William A. Palmer III, was the principal in-house attorney on the deal.

“If you look at investment grade corporate bonds, that has been the one bright spot in the market in the U.S. this year,” Eaton said, pointing out that publications such as the Wall Street Journal have reported this as a seller’s market for investment-grade corporate bonds. “What that means is the spread to treasuries—the cost of borrowing money—has gone down for issuers. So really AGL Resources did very well on their cost

of issuing the corporate bonds.”

The coupon rate on the bonds was 5.25 percent, although some were sold at an original issue discount, Eaton said. The last time his firm helped AGL with an issuance, in December 2007, he added, the rate was higher, at 6.375 percent.

Barkley said the deal moved quickly, taking just three weeks from start to finish.

“It was a take-down off of an already filed shelf registration statement,” he said. “These sorts of registered notes offerings happen pretty quickly, and the companies view this window as an attractive time to raise capital in the markets. Plus, the markets are being pretty receptive to these offerings at this time.”

According to information from AGL Resources, the company plans to use the net proceeds of the sale to repay a portion of its short-term debt.

The offering was underwritten by Goldman Sachs & Co., SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC, operating as joint book-running managers. Troutman Sanders’ partners Marlon F. Starr and Patrick W. Macken represented the underwriters, with associates Erica B. Jackson and Brad R. Resweber.

This was an unusual deal in only two respects, Eaton said. First, the deal went through with virtually no hassles or hiccups, he said. Second, he added, the deal closed in August—a month that used to be bereft of deals because lawyers, investment bankers, underwriters and other professionals all were on vacation.

“Because of the volatility of the last few years,” Eaton said, the attitude on deal-making has changed to this: “Just do a deal when you can.”