Photo: Daniel Martínez Garbuno.
The US Bankruptcy Court for the Southern District of New York approved LATAM Airlines Group‘s Plan of Reorganization filed in the context of its Chapter 11 reorganization proceeding on Saturday, the company reported. LATAM’s Chapter 11 Plan has been approved.
LATAM’s Chapter 11 is coming to an end.
This weekend, LATAM Airlines Group reached a milestone in its Chapter 11 bankruptcy process. The company announced that the US Bankruptcy Court for the Southern District of New York approved the Reorganization Plan.
Roberto Alvo, CEO of LATAM Airline Group said:
“In the context of our Chapter XI restructuring, Judge Garrity confirmed our restructuring plan.
After many months of negotiations and after gathering the support of the majority of our creditors and the trust of our future shareholders, who will invest over $5.4 billion, we have completed our US part of the process.
Next, our plan needs to be approved by our current shareholders. Then the shares and convertible bonds that form the backbone of our financing process will need to be registered with the Chilean Securities Regulator.
All in all, we expect to exit our restructuring during the second semester of this year.
This significant accomplishment is a testament to the passion, commitment, and resilience of our 30,000 employees.
Without their support, concentration, and care, this step would not have been possible. Thank you all for believing!
LATAM will emerge stronger from this crisis. The challenge that has been put in front of us has only made us better!”
The Plan
LATAM’s Plan of reorganization was backed by nearly all the company’s creditors and complies with US and Chilean legal requirements.
Once effective, the LATAM Plan will inject approximately US$8 billion through a combination of a capital increase, the issuance of convertible bonds, and new debt.
This injection includes a US$5.4 billion of financing backed by major shareholders such as Delta Air Lines, Qatar Airways, and LATAM’s significant creditors.
LATAM is scheduled to formally leave the Chapter 11 procedure in the second half of this year.
A couple of weeks ago, LATAM secured exit finance commitments that will provide a new debt of US$2.25 billion and a new credit facility of US$500 million, plus US$1.17 billion in debtor-in-possession (DIP) financing.
Next phase
Now the company is focused on implementing the corporate actions necessary to complete the exit from the Chapter 11 reorganization process in the coming months.
This includes approval at the Extraordinary Shareholders’ Meeting of the new capital structure contemplated in the Plan, the registration of shares and bonds in the securities registry of the Financial Market Commission, and the implementation of the respective preferential offering periods of the convertible shares and bonds in favor of LATAM’s current shareholders.
How’s the exit financing structured?
LATAM’s Exit Financing has been structured as debtor-in-possession financing to be provided during Chapter 11. It has been structured to remain in place after LATAM emerges from bankruptcy. Once LATAM meets the exit date from Chapter 11, the Exit Financing will automatically convert into financing.
The exit financing is structured as follows:
- US$500 million Exit Revolving Facility, which will accrue interest at LATAM’s election, either: (i) ABR plus an applicable margin of 3.00%; or (ii) SOFR rate plus an applicable margin of 4.00%.
- US$750 million Term B Loan Facility, which will accrue interest at LATAM’s choice, either: (i) ABR plus an applicable margin to be determined at the time of allocation thereof; or (ii) SOFR rate plus an applicable margin to be determined at the time of allocation thereof.
- US$750 million Bridge to 5Y Notes Facility Proposal
- US$750 million Bridge to 7Y Notes Facility Proposal
The interest rate for the bridge loans indicated above will be determined based on market conditions available at the time of closing.
