The US Bankruptcy Court in New York has approved the USD8 billion reorganisation plan of the LATAM Airlines Group and its subsidiaries in Brazil, Chile, Colombia, Ecuador, Peru, and the United States, marking another milestone towards the Group’s expected exit in the second half of 2022 from US Chapter 11 bankruptcy protection.
Backed by nearly all of LATAM’s creditors, the plan complies with US and Chilean legal requirements and results from months of negotiations and mediation amongst major stakeholders, the airline group said in a statement after the court confirmation order was issued on June 18.
“This is a very important step in the process to emerge from Chapter 11, and we will continue working hard to complete the remaining steps in the coming months,” said LATAM Airlines Group Chief Executive Officer Roberto Alvo.
LATAM was now focused on implementing corporate actions necessary to complete the Chapter 11 reorganisation process. This included approval at an extraordinary shareholders’ meeting of:
- the new capital structure contemplated in the plan;
- the registration of shares and bonds in the securities registry of the Financial Market Commission (CMF); and
- the implementation of the respective preferential offering periods of the convertible shares and bonds in favour of LATAM’s current shareholders.
Once effective, the plan will inject about USD8 billion through a combination of a capital increase, the issuance of convertible bonds, and new debt. This includes USD5.4 billion of financing backed by major shareholders - Delta Air Lines, Qatar Airways, and Grupo Cueto - and LATAM’s major creditors (the so-called Parent Ad Hoc Group of creditors and certain local bondholders).
In addition, the Group earlier this month signed debt commitment letters with various financial entities for new debt of USD2.250 billion, and a new revolving credit facility for USD500 million. Financial institutions involved include JP Morgan Chase Bank, Goldman Sachs Lending Partners LLC, Barclays Bank PLC, BNP Paribas, BNP Paribas Securities Corp., and Natixis Bank, New York branch. The exit financing will remain in place after the Group emerges from Chapter 11.
LATAM Airlines Group and its affiliates operate a passenger fleet of B767s, B777s, B787s, A321, A320s, A320neos, and A319s. Cargo subsidiaries LATAM Cargo Chile, LATAM Cargo Colombia, and LATAM Cargo Brasil together have a fleet of 14 freighters, which will gradually increase to a total of up to 21 freighters by 2023.