LATAM Airlines Group is having trouble getting enough lenders to extend the USD600 million revolving line of credit the company needs to exit bankruptcy, reports Bloomberg.
So far, the airline holding does not have enough lenders to finance a replacement for a revolving loan that matured on March 29, 2022, after it borrowed the maximum available, according to documents filed on April 24 by the airline group with the US Bankruptcy Court in the Southern District of New York.
Consequently, LATAM has changed its Chapter 11 exit plan in a way that forces investors to keep lending money to the company, a lawyer for one of the lenders, Glendon Capital Management, said in court this week.
If LATAM fails to reach an agreement by the end of next week, Glendon Capital Management will fight the airline's proposed restructuring plan, the company’s lawyer, Vincent Indelicato, said during the court hearing.
LATAM is preparing to face creditors later this month in a court hearing over the airline's USD5.4 billion Chapter 11 exit plan. A trustee for the lenders will try to negotiate a new revolving loan before May 10, a lawyer for the trustee told US Bankruptcy Judge James L. Garrity.
Under the amended plan submitted by LATAM, lenders (holders of the so-called RCF claims) will be entitled to choose between two different treatments: Lenders that provide financing commitments will receive “Class 1a treatment”, while those that do not provide financing commitments, as well as those who make no election, will receive “Class 1b treatment”, the airline explained in a statement.
“Under this construct, the aggregate amount of the revised RCF credit agreement would be USD600 million consisting of a combination of a Tranche A facility and a Tranche B facility,” it explained.
The Tranche A facility would be reserved for lenders that provided further credit (Class 1a treatment). It would be a new three-year revolving facility that would remain undrawn throughout the effective date of the Chapter 11 exit plan. These lenders would also receive a distribution in cash equal to the outstanding existing revolving loan, plus the respective unpaid interest, fees, and expenses.
The Tranche B facility would be reserved for lenders not extending further financing and those who made no election (Class 1b treatment). It would serve the purpose of refinancing (in the form of take-back debt) over a five-year term the outstanding principal amount of their respective RCF claims. These lenders would also receive a distribution in cash equal to any unpaid interest, fees, and expenses.
Glendon Capital Management and other lenders have until May 10 to decide whether to vote for the adjusted plan, LATAM attorney Bryan Kotliar said. After that, the company would ask Judge Garrity to approve the plan at a so-called “Confirmation Hearing” scheduled for May 17 and 18.
