We have a date: LATAM Airlines will exit its Chapter 11 process in the first week of November, the company said on Wednesday. Once LATAM emerges from the bankruptcy process in the United States, all three Latin American airlines to have filed for this protection in 2020 will be fully reorganized. Avianca emerged late last year and Aeromexico in the first quarter of 2022. 

On Wednesday, LATAM Airlines informed through a Material Fact furnished to the Chilean Comisión para el Mercado Financiero (Financial Market Commission) that it is targeting to emerge from Chapter 11 next month.  It also finalized pricing for five and seven-year senior secured notes for US$450 million and US$700 million, respectively, in addition to a five-year term loan B for US$1.1 billion. 

Roberto Alvo, CEO of LATAM Airlines said:

“In a very challenging and dynamic environment, we are on track to close all of the financings required under the Company’s Plan of Reorganization. In the coming weeks, we expect to emerge from Chapter 11 with approximately U.S.$2.2 billion of liquidity and a debt reduction of approximately 35% compared to the debt we had outstanding before entering into this process.”

LATAM first filed for Chapter 11 in May 2020 to cope with the impact of the COVID-19 pandemic. The airline reorganized its debt, reduced the size of its fleet (with the lease rejection of the Airbus A350-900 subfleet), closed its branch in Argentina, pledged to use up to 5% of sustainable aviation fuels by 2030, and more during these past three years. 

Financial announcements

Besides announcing the incoming emergence from its Chapter 11 process, LATAM Airlines also priced an offering of US$450 million for the senior secured notes due 2027 and US$700 million for the senior secured notes due 2029. Additionally, the company priced a Term Loan B (which represents nearly half of the financing of LATAM post-Chapter 11) of US$1.1 billion with an interest rate of either ABR + 8.50% or Adjusted SOFR + 9.50%. 

These announcements represent essential milestones for LATAM and one of the last in its Chapter 11 proceedings. With these new funds, LATAM will have obtained the necessary financing to repay its debtor-in-possession financing currently in place, added the company in a statement. 

Furthermore, as the transaction is structured, the Term Loan B will be able to be repaid at par starting in year three. The Company also has secured a new revolving credit facility (“RCF”) in the amount of approximately U.S.$500 million.

In total, LATAM’s final financing structure (also known as the DTE Financing) includes the following: 

  1. A revolving credit facility of US$500 million. 
  2. A five-year term loan facility of US$1.1 billion 
  3. The offering of the notes. Senior secured notes due 207 for an aggregate principal amount of US$450 million, and senior secured notes due 2029 for an aggregate principal amount of US$700 million. 
  4. A five-year bridge-to-notes facility in an aggregate principal amount of US$750 million due 2027.
  5. A seven-year bridge-to-notes facility in an aggregate principal amount of US$750 million due 2029. 

Finally, LATAM’s exit financing also includes a junior debtor-in-possession facility of approximately US$1.146 billion. This facility is subordinated in right of payment of the DTE Financing. 

Please follow and like us:
Pin Share

Daniel Martínez Garbuno is a Mexican journalist. He has specialized in the air industry working mainly for A21, a Mexican media outlet focused entirely on the aviation world. He has also published on other sites like Simple Flying, Roads & Kingdoms, Proceso, El Economista, Buzos de la Noticia, Contenido, and Notimex.

%d bloggers like this: