LATAM Airlines and its affiliates in Chile, Peru, Colombia, Ecuador and the United States initiated a voluntary reorganization and restructuring of the company’s debt under Chapter 11 protection in the United States with the support of the Cueto and Amaro families and Qatar Airways, two of the largest shareholders of LATAM.
FTI Consulting is serving as financial advisor, PJT Partners is serving as investment banker, and Cleary Gottlieb Steen & Hamilton and Claro & Cia are serving as legal advisors to LATAM Airlines.
In light of the effects of COVID-19 on the worldwide aviation industry, this reorganization process provides LATAM with an opportunity to work with the group’s creditors and other stakeholders to reduce its debt, access new sources of financing and continue operating.
LATAM and its affiliates will have the opportunity to resize their operations to the new demand environment and reorganize their balance sheets. LATAM and its affiliates will continue flying as conditions permit throughout the process.
“LATAM entered the COVID-19 pandemic as a healthy and profitable airline group, yet exceptional circumstances have led to a collapse in global demand and has not only brought aviation to a virtual standstill, but it has also changed the industry for the foreseeable future,” Roberto Alvo, CEO of LATAM, said. “We have implemented a series of difficult measures to mitigate the impact of this unprecedented industry disruption, but ultimately this path represents the best option to lay the right foundation for the future of our airline group. We are looking ahead to a post-COVID-19 future and are focused on transforming our group to adapt to a new and evolving way of flying, with the health and safety of our passengers and employees being paramount.”
The group secured the financial support of shareholders, including the Cueto and Amaro families and Qatar Airways, to provide up to $900 million in debtor-in-possession financing. To the extent permitted by law, the group would welcome other shareholders interested in participating in this process to provide additional financing. In addition, as of the filing, the group had approximately $1.3 billion in cash on hand.
LATAM and its affiliates are also in discussions with their respective governments of Chile, Brazil, Colombia and Peru to assist in sourcing additional financing, protect jobs where possible and minimize disruption to its operations.
“Faced with the biggest crisis in the history of aviation, the board has approved this path forward having analyzed all the available alternatives to ensure the sustainability of the group,” Ignacio Cueto, chairman of LATAM’s board of directors, said. “As we have adapted to new realities in the past, we are confident that LATAM will be able to succeed in the post-COVID-19 context and continue to serve Latin America, connecting the region with the world.”