LATAM Airlines Group has secured the funding it needs to exit its Chapter 11 judicial restructuring process underway in the United States, including USD2.25 billion as debt issuance and USD500 million in a new revolving credit facility, the company said in a Securities and Exchange Commission filing on June 11.

The funding will be a combination of the USD500 million in revolving credit and three USD750 million loans, and the deal also includes USD1.172 billion structured as debtor-in-possession (DIP) financing, to be provided during the Chapter 11 process - prior to exit - with “a lower repayment preference than the exit financing.”

This capitalisation needed to exit Chapter 11 bankruptcy was arranged with a consortium of banks (JP Morgan, Goldman Sachs, Barclays, BNP Paribas, and Natixis), with whom the letters guaranteeing the amount have already been signed, the group said.

The settlement is subject to approval by the court conducting the bankruptcy proceedings, the US Bankruptcy Court in the Southern District of New York. The LATAM Airlines (LA, Santiago de Chile) parent said it gained “sufficient support” in early May from a majority of its unsecured creditors for its restructuring plan but is still awaiting the legal nod for the plan.

“After carrying out an exhaustive search process for the best available conditions for its financing to exit the Chapter 11 process, LATAM has signed debt commitment letters with various financial entities, which represents a sign of market confidence in LATAM and allows the group to take a further step towards emerging from the Chapter 11 process during the second half of 2022 with a solid financial structure,” the group said in a statement.

“This commitment secures us the full amount of financing required to complete our restructuring plan and, very importantly, with a degree of flexibility that allows us to optimise existing market conditions,” explained LATAM Airlines CEO Roberto Alvo, adding that “the USD2.25 billion of debt is in addition to the USD5.4 billion of equity we secured in January of this year.”

The proceeds from the exit financing will be used in part to repay the existing DIP financing in full during the Chapter 11 process. In more detail, LATAM broke down the exit financing as:

  • a USD500 million Exit Revolving Facility;
  • a USD750 million Term B Loan Facility;
  • a USD750 million Bridge to 5Y Notes Facility Proposal;
  • a USD750 million Bridge to 7Y Notes Facility Proposal.