LATAM expects to exit Judicial Recovery in November

LATAM Airlines Group SA informed today, through a Material Fact to the Commission for the Financial Market of Chile (CMF), that the company, together with Professional Airline Services Inc. – Florida corporation and wholly-owned subsidiary of LATAM – has priced the offering of US$450 million principal amount of Senior Secured Notes due 2027, with a coupon of 13.375%, at an issue price of 94,423% and the value principal of US$700 million senior guaranteed notes due 2029, with a coupon of 13,375%, at an issue price of 93,103%. 

In addition, the company has priced the $1,1 billion term loan at an interest rate of your choice of ABR + 8,50% or Adjusted Term SOFR + 9,50% upon exit from Chapter 11 , prior to the effective date, the rate will be APR + 8,75% or Adjusted Term SOFR + 9,75%. 

This is yet another important milestone for the company and one of the last steps in the Chapter 11 process. With these new resources, LATAM will have obtained the necessary financing for the payment of its DIP financing (debtor-in-possession) and plans to exit Chapter 11 of the US Bankruptcy Code in the first week of November. 

In addition, as the transaction is structured, the term financing (which represents approximately half of all financing) may be paid at face value from the third year onwards. The company also obtained a revolving line of credit of approximately US$500 million. 

“In a very challenging and dynamic context, we are on track to complete the financing required by the Restructuring Plan. In the coming weeks, we expect to exit Chapter 11 with $2.2 billion of liquidity and a debt reduction of about 35% compared to what we had when we started this process.”, said the LATAM CEO Roberto Alvo. 

In June, the company informed the CMF about the Chapter 11 exit financing structure, which contemplated the contracting of new debt under different modalities of approximately US$2.2 billion, including guaranteed notes and term financing, in addition to a new approximately US$500 million revolving credit facility.

Originally, the notes were structured as bridge loans for a total amount of US$1.5 billion provided by various banks. 

The company intends to execute the bridge loans, the revolving credit line and the term financing and withdraw them as follows: (i) the bridge loans on October 12, 2022; (ii) term financing; (ii a) an initial amount of US$750 million on October 12, 2022 and (ii b) and the remaining US$350 million on the Chapter 11 exit date. Already, the DIP Junior financing (as defined below) will also be withdrawn on October 12, 2022. Finally, the offering of the notes is expected to close on October 18, 2022. 

The company intends to partially use the funds from these lines to pay for the current DIP line. In addition, proceeds from the term loan and notes will be used to amortize the bridge loans. 

The following paragraphs are a summary of the final funding structure:

1. A revolving line of credit (Exit Revolving Facility) of US$500 million, which will include interest, at LATAM's discretion, alternatively as follows: (i) ABR plus an applicable margin of 3%; or (ii) adjusted forward SOFR plus an applicable margin of 4%. 
2. A five-year financing of US$1,1 billion, which will include interest, at LATAM's option, alternatively according to: (i) ABR plus an applicable margin of 8.75%; or (ii) Adjusted Term SOFR plus an applicable margin of 9.75% and, after exiting Chapter 11, alternatively to (i) ABR plus an applicable margin of 8.5%; or (ii) Adjusted Term SOFR plus applicable margin of 9.5%. 
3. The offering of the Senior Secured Notes due 2027 for an aggregate principal amount of US$450 million, with a coupon of 13,375%, at an issue price of 94,423%, and the Senior Secured Notes due 2029 for a total principal amount of US$700 million, with a coupon of 13,375%, at an issue price of 93,103%. The notes will be guaranteed by certain LATAM s and the proceeds will be used to partially repay the bridge loans. The offer, whose closure is scheduled for October 18, 2022, is conditional on the closure of the revolving credit line and term financing. 
4. A bridge loan for the five-year notes in an aggregate principal amount of $750 million due in 2027.
5. A bridge loan for the seven-year notes for an aggregate principal amount of $750 million due 2029. 

The exit financing also includes a $1.146 billion DIPJunior financing, which will remain in effect for the remainder of the Chapter 11 process, ie, prior to exit, the repayment of which is subordinated to the credit facilities indicated above (items 1 to 5). The DIP Junior financing will accrue interest, at LATAM's discretion, alternatively to: (i) APR plus an applicable margin of 12,5%; or (ii) SOFR term plus applicable margin of 13,5%.

The grades were not and will not be ed under the Securities Act of 1933 and modifications thereof or under the securities laws of any state or other jurisdiction. As a result, they may not be offered or sold in the United States or to any person in the United States unless pursuant to an applicable exemption or in a transaction not subject to the registration requirements of the United States. Securities Act of 1933. The notes will only be offered to qualified institutional investors pursuant to Rule 144A of the Securities Act of 1933 and to non-US persons outside the United States under Regulation S of the same Act.

This notice does not constitute an offer to sell or solicitation of an offer to purchase the Notes in the United States or any other jurisdiction, nor will there be any sale of the Notes in any jurisdiction where such offer, solicitation or sale is unlawful prior to registration or qualification of pursuant to the securities laws of such jurisdiction or an exemption provided in such Law. This notice contains information about pending transactions and it is not possible to guarantee that these transactions will be completed.