The US Bankruptcy Court in the Southern District of New York has greenlighted a USD750 million credit line to the LATAM Airlines Group from Oaktree Capital and Apollo Global Management, according to an order filed by Judge James L. Garrity JR. on October 18, 2021.
As previously reported, the court order follows after the LATAM Board on September 24 unanimously voted in favour of this Tranche B financing, which would be available at a more competitive rate of 7.5% than those obtained for its existing tranches. LATAM already has access to USD2.45 billion in Debtor in Possession (DIP) financing under the first two tranches – USD1.3 billion in Tranche A and USD1.15 billion in Tranche C. It still has USD800 million availability under those two tranches having drawn USD1.65 billion to date.
LATAM Airlines Group and its affiliates in Chile, Colombia, Ecuador, the United States, Peru, and Brazil filed for voluntary protection under the US Chapter 11 on May 26, 2020, after being heavily impacted by travel restrictions arising from the COVID-19 pandemic. Through the Chapter 11 process, the group aims to restructure its operations and reorganise its balance sheets.
Judge Garrity ruled that “good and sufficient cause” had been shown for the entry of this Tranche B final DIP order and for authorisation of the debtors to obtain the financing.
The loan would be used to, amongst other things, permit the orderly continuation of businesses; maintain business relationships with vendors, suppliers, carriers, and customers; make payroll; make capital expenditures; and pay the costs of administration of their estates and satisfy other working capital and general corporate purposes of the debtors.
“The ability of the debtors to continue to obtain sufficient working capital and liquidity through the incurrence of the new indebtedness […] on favourable terms is vital to the preservation and maintenance of the going concern values of the debtors and to the debtors’ successful reorganisation,” the judge said.
