BY Fraser Tennant
In a bid to exit its Chapter 11 bankruptcy, airline holding company LATAM Airlines Group SA and its affiliates in Brazil, Chile, Colombia, Ecuador, Peru and the US have filed a plan of reorganisation alongside a restructuring support agreement (RSA).
The largest airline in Latin America, Chile-based LATAM sought Chapter 11 bankruptcy protection in New York in May 2020 as world travel came to a halt amid the disruption caused by the coronavirus (COVID-19) pandemic.
The plan of reorganisation proposes the infusion of $8.19bn into the group through a mix of new equity, convertible notes and debt, which will enable the group to exit Chapter 11 with appropriate capitalisation to effectuate its business plan. Upon emergence, LATAM is expected to have total debt of approximately $7.26bn and liquidity of approximately $2.67bn.
Furthermore, LATAM will raise a $500m new revolving credit facility and approximately $2.25bn in total new money debt financing, consisting of either a new term loan or new bonds. The group also used and intends to use the Chapter 11 process to refinance or amend the group’s pre-petition leases, revolving credit facility and spare engine facility.
“The last two years have been characterised by hardship across the globe,” said Roberto Alvo, chief executive of LATAM. “We have reeled as global aviation and travel were brought to a virtual standstill by the largest crisis to ever face our industry. While our process is not yet over, we have reached a critical milestone in the path to a stronger financial future.
“We are grateful to the parties who have come to the table through a robust mediation process to reach this outcome, which provides meaningful consideration to all stakeholders and a structure that adheres to both US and Chilean law,” he continued. “Their infusion of significant new capital into our business is a testament to their support and belief in our long-term prospects.”
Upon confirmation of the plan of reorganisation, the group intends to launch an $800m common equity rights offering, open to all shareholders of LATAM in accordance with their preemptive rights under applicable Chilean law, and fully backstopped by the parties participating in the RSA.
Mr Alvo concluded: “We are thankful for the exceptional team at LATAM that has weathered the uncertainty of the past two years and enabled our business to keep operating and serving our customers as seamlessly as possible.”
News: LATAM Airlines files restructuring plan to exit bankruptcy