By Juan Pedro Sanchez Zamudio
LATAM Presents Reorganization Plan Including $8.2 Billion Capital Injection
LATAM Airlines Group and its subsidiaries in Brazil, Chile, Colombia, Ecuador, Peru and the U.S. announced the presentation of a reorganization plan, which outlines the group’s strategy to exit Chapter 11 bankruptcy in accordance with U.S. and Chilean legislation.
In a press release, the Chilean carrier stated that the plan is complemented by a Restructuring Support Agreement entered into with the Ad Hoc Group of Parent Creditors — which is the largest group of unsecured creditors in these Chapter 11 cases — and some of LATAM Airlines Group’s shareholders.
The RSA details the agreement between LATAM Airlines Group, the holders of more than 70% of the parent’s unsecured credits, and the holders of approximately 48% of the U.S. bonds dated 2024 and 2026, and some shareholders who have more than 50% of the ordinary capital.
This agreement depends on the application of the groups’ definitive documentation, and to the corporate approvals by the shareholders.
The plan proposes the injection of $8.2 billion into the group through a combination of fresh capital, convertible bonds and debt, which will allow the group to exit Chapter 11, with the appropriate capitalization to execute the business plan.
After leaving the process, LATAM Airlines Group is expected to have a total debt of approximately $7.26 billion and liquidity of approximately $2.67 billion.
After the plan’s confirmation by the U.S. court, the Chilean group intends to launch an offering of $800 million in preferential rights through the issuance of common shares, which will be opened to all LATAM shareholders in accordance with their preferential rights, by virtue of the applicable Chilean legislation, and which will be fully supported by the parties that participate in the RSA.
Three different classes of convertible bonds will be issued by LATAM Airlines Group, which will be offered preferentially to its shareholders:
- The A Convertible Bonds will be delivered to some of the unsecured creditors of the LATAM Airlines Group parent company in liquidation (dation in payment) for their credits allowed under the plan.
- The B Convertible Bonds will be subscribed and acquired by the shareholders.
- The C Convertible Bonds will be awarded to certain unsecured creditors in exchange for a combination of new funds to LATAM Airlines Group and to service their credits, subject to certain limitations and withholdings by the groups participating in the RSA.
The B and C Convertible Bonds will be delivered, totally or partially, in consideration of a new contribution of money for a total amount of approximately $4.64 billion fully supported by the RSA.
LATAM Airlines Group will obtain $500 million in a new committed credit facility and approximately $2,250 million in financing through new debt resources, either through a new term loan or new bonds.
It is important to remember that, as they have done throughout the entire process, all group companies continue to operate to the extent that travel conditions and demand allow.