LATAM Airlines Group and its affiliates in Brazil, Chile, Colombia, Ecuador, Peru and the United States filed a plan of reorganization that reflects the path forward for the group to exit Chapter 11 in compliance with both U.S. and Chilean law.
The plan is accompanied by a restructuring support agreement with the company’s parent ad hoc group, which is the largest unsecured creditor group in LATAM’s Chapter 11 cases, and certain of LATAM’s shareholders. The RSA documents the agreement between LATAM, the aforementioned holders of more than 70% of parent unsecured claims and holders of approximately 48% of 2024 and 2026 U.S. notes and certain shareholders holding more than 50% of common equity, subject to the execution of definitive documentation by the parties and the obtaining of corporate approvals by those shareholders. As they have throughout the process, all of the companies in the group are continuing to operate as travel conditions and demand permit.
“The last two years have been characterized by hardship across the globe. We have lost friends and family, colleagues and loved ones. And we have reeled as global aviation and travel were brought to a virtual standstill by the largest crisis to ever face our industry. While our process is not yet over, we have reached a critical milestone in the path to a stronger financial future,” Roberto Alvo, CEO of LATAM Airlines Group, said. “We are grateful to the parties who have come to the table through a robust mediation process to reach this outcome, which provides meaningful consideration to all stakeholders and a structure that adheres to both U.S. and Chilean law. Their infusion of significant new capital into our business is a testament to their support and belief in our long-term prospects. We are thankful for the exceptional team at LATAM that has weathered the uncertainty of the past two years and enabled our business to keep operating and serving our customers as seamlessly as possible.”
The plan proposes the infusion of $8.19 billion into the group through a mix of new equity, convertible notes and debt, which will enable the group to exit Chapter 11 with appropriate capitalization to effectuate its business plan. Upon emergence, LATAM is expected to have total debt of approximately $7.26 billion and liquidity of approximately $2.67 billion.
Upon confirmation of the plan, LATAM intends to launch an $800 million common equity rights offering, open to all shareholders of LATAM in accordance with their preemptive rights under applicable Chilean law and fully backstopped by the parties participating in the RSA, subject to the execution of definitive documentation and, with respect to the backstopping shareholders, receipt of corporate approvals
LATAM will also issue three distinct classes of convertible notes, all of which will be preemptively offered to shareholders of LATAM. In addition, LATAM will raise a $500 million new revolving credit facility and approximately $2.25 billion in total new money debt financing, consisting of either a new term loan or new bonds. LATAM also used and intends to use the Chapter 11 process to refinance and/or amend the group’s pre-petition leases, revolving credit facility and spare engine facility.
