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.

In a market largely bereft of real estate deals, federal stimulus programs and funds are creating work for dirt lawyers—and tax and bond counsel, too.

Althea J.K. Broughton at Arnall Golden Gregory is one of those lawyers. Her team recently closed two multifamily affordable housing transactions, one in the City of Decatur, the other in Union City. Both deals involved a complex mix of funding sources and took more than a year to complete.

The $5.8 million Decatur project, called Allen Wilson Phase I, will be located in downtown Decatur at Robin Street, Electric Avenue and Commerce Drive. Broughton, along with Arnall lawyers Alison M. Drummond, James T. Rauschenberger and A. Rian Perry, represented the Decatur Housing Authority and two affiliates to negotiate financing for the city’s first mixed-finance transaction of this type. The housing authority’s general counsel, Alan E. Rauber of McCurdy & Candler, also was involved.

“I think this deal is somewhat unusual,” Broughton said. “Typically, first of all, there are not very many bond deals that are closing in this environment, so when I say unusual, I mean that. Also, this was not your typical bond deal with an issuer and an indenture and a trustee. This was a little bit different in that you had the housing authority issuing notes that were purchased by Fannie Mae as part of a tax-exempt execution.”

Broughton said she helped her client get various approvals from the Department of Housing and Urban Development, which requires them in mixed-finance transactions. She said the tax-exempt bonds required HUD approval because the Decatur Housing Authority was essentially borrowing against a future stream of funds from HUD, then using those rights as collateral on a tax-exempt loan from Fannie Mae. The lawyers also got HUD approval for the receipt of stimulus funds under the American Recovery and Reinvestment Act, or ARRA.

Caryl Greenberg Smith of Hunton & Williams, who served as bond counsel on both the Decatur and Union City deals, said that Fannie Mae is trying to promote affordable housing by purchasing notes directly rather than having the housing authority market the notes publicly. Such deals, she said, can offer a “huge, huge reduction in the interest rate compared to what you would have gotten in the market.”

The bond aspect of the Decatur deal also yielded 4 percent housing tax credits from the Georgia Department of Community Affairs, Broughton said, which were then sold to equity investor Peachtree Investment Solutions, LLC, represented by Aaron J. Kowan at Taylor English.

Kowan said his client invested about $2 million, but that the deal’s sophistication and complexity was on par with $30 million projects. “For the size of the deal, it was probably the most complicated deal I ever worked on. I wish I’d known that before I took the deal,” he said, and laughed. “I was working on a flat fee.”

Kowan, a tax lawyer who worked on the transaction with associate Brandon C. Hardy, said the deal was complex because it involved three to four levels of debt, each with unusual business and tax issues related to the public-private partnership, and unusual guaranty provisions related to HUD backing.

In the Union City deal, Broughton’s team represented Ambling Development Partners, which plans to build a 150-unit elderly housing complex known as Woodbridge at Parkway Village at the intersection of Southwood Road and Thompson Road.

Broughton said this deal, worth $16 million, included ARRA stimulus funds through HUD and bonds which were credit-enhanced by the Federal Housing Administration to make them more marketable. The bonds, which are tax-exempt and yield a 4 percent tax credit, were purchased by equity investor Community Affordable Housing Corporation, represented by Robert G. Coberly from Bryan Cave’s Washington office.

Broughton said stimulus funding was crucial to both deals, and is providing a boost to real estate work in general. “I really think the stimulus funds have actually helped save some deals or made some deals viable and have gotten them to closing,” she said. “Initially we all had to figure out how those funds would work, but I think they’ve promoted a lot of development activity.”

The process to develop and finance Atlanta's BeltLine, a proposed 22-mile loop of transit, green space and mixed-use development, has not been an easy one. But in December, lawyers from three Atlanta firms—Hunton & Williams, Greenberg Traurig and Murray Barnes Finister—worked on various aspects of the deal that resulted in a $78.1 million bond issuance that refinances some of the BeltLine's debt on more favorable terms.

Douglass P. Selby, a Hunton & Williams municipal finance partner, represented the city of Atlanta and Atlanta BeltLine Inc. in the reissuance of $64.5 million in Series 2008 BeltLine tax-exempt tax allocation district (TAD) bonds, which were remarketed to new investors. Selby also worked on the issuance of about $13.6 million in new TAD bonds.

The transaction, said Selby, refinances a private placement done in October 2008—right around the time Lehman Brothers collapsed—when credit markets were anything but favorable.

“It was the worst of all possible times,” said Selby. But, he explained, the BeltLine needed the money to acquire what's known as the Northeast corridor property, 4.5-mile section of the proposed BeltLine that was purchased from Gwinnett developer Wayne Mason. “SunTrust and Wachovia were kind enough to extend credit during that time,” Selby said. “The 2008 structure was always meant to be a temporary sort of placeholder.”

Now that credit markets have recovered a bit, he said, the BeltLine was able to reissue the bonds “without the burdensome call features that the 2008 financing had attendant to it … . The 2008 holders could put their bonds, requiring the city to refinance them. The new financing is more traditional long-term financing,” he said.

The new debt, which has an average yield of about 7.5 percent, matures in 2031, he said. Nine investors purchased the new issuance, which Selby said was oversubscribed.

“It was a very good sign, the fact that there were more buyers interested in buying the paper than there were bonds,” he said. He also said that the BeltLine project likely will go back to market later this year with an issue for new money purposes that will include city, county and school board increments.

Selby said his team, which also included tax partner William H. McBride in the firm's Raleigh, N.C., and Washington offices and Atlanta public finance associate Rachel L. Devenow, began working on the issuance with the leader of the investment banking syndicate, Wachovia (now Wells Fargo) in October. SunTrust and Jackson Securities also were part of the syndicate, which was represented by Teresa P. Finister of Murray Barnes Finister. Kenneth M. Neighbors from Greenberg Traurig served as disclosure counsel to the city. Veronica C. Jones, general counsel of the Atlanta Development Authority, the implementing agency for the BeltLine project, could not be reached for comment by press time.

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.

Though the financial crisis has managed to gut some practice areas—venture capital, anyone?—it’s proving a boon to others.

One beneficiary is bond work created when cash-strapped banks decide not to renew letters of credit. That’s the situation that pushed the Atlanta City Council on Monday to adopt a Series 2009 bond ordinance for funds not to exceed $750 million. A portion of that money will be used to refinance commercial paper issued for the city’s water and sewer department.

“That’s an example,” says Earle R. Taylor III, a partner in Kilpatrick Stockton’s public finance practice and counsel for the city on this deal. “The financial crisis has really been the majority of what I’ve worked on in the past year.”

He explains that three primary situations resulting from the credit crisis have boosted the need for refinancings. “It’s either the market for the bonds, in the case of auction-rate paper—the city had some of that—and the market seized up,” he says. “Or you’ve got bonds backed by an insurance company or a bank that gets into financial trouble and gets their credit rating downgraded and investors no longer want them, so the bonds get put back [to the lender]. Or you get a letter of credit that is not renewed or is terminated simply because capital is scarce and banks aren’t interested in providing those products anymore.”

In the case of the city’s water-sewer deal, he says Atlanta’s near junk-bond rating was not a factor in the banks’ decision not to renew their letters of credit. Rather, he says, just the availability and price of credit changed.

The banks which elected not to renew their letters of credit on the city’s water-sewer deal are J.P. Morgan Chase NA; Bank of America NA; Dexia Crédit Local and Lloyds Bank TSB plc.

Taylor says he hopes the bonds, which are slated to be sold in June, will bring in $600 million to $700 million.

Another recession-fueled deal: The city had about $441 million in variable rate demand bonds backed by a liquidity facility from Dexia, a European bank, Taylor says. But the renewal date was Friday, and Dexia elected not to renew. The bonds were set to amortize over 40 years, Taylor says, and if the city can’t get them refinanced, the amortization will shrink to a seven-year term starting in November. A shorter term would mean much higher payments for the city.

He says the city plans to remarket those bonds as long-term, fixed-rate bonds later this summer.

Taylor inked another credit-crisis-related deal because of an insurer’s downgraded rating.

In that deal, municipal bond insurer Ambac Financial Group was AAA rated when it insured the Georgia State University Foundation’s deal to purchase the old SunTrust headquarters at Five Points.

The deal was financed by variable rate demand bonds backed by Ambac, says Taylor, with J.P. Morgan Chase under a standby bond purchase agreement.

“Ambac is now downgraded as junk because of the financial crisis,” Taylor says. “So all those bonds are back at J.P. Morgan and bonds payable over 30 years are now due in five.”

Taylor says he’s in the middle of trying to restructure that $70 million to $80 million deal and get it refinanced. He says he hopes to close in early June.

“These are perfect examples of things we never thought would have happened in a million years, and they’ve happened,” he says. “It’s caused us to look at our documents and contracts in ways we never thought we would.”