The LATAM Airlines Group and its s in Brazil, Chile, Colombia, Ecuador, Peru and the United States announced today (26/11) the presentation of a Reorganization Plan, which describes the way for the group to exit Chapter 11, in compliance with US and Chilean legislation.
The Plan is accompanied by a Restructuring Agreement (RSA) with the Ad Hoc Group of Parent Creditors, which is the largest group of unsecured creditors in these Chapter 11 cases, and certain LATAM shareholders.
The RSA records the agreement and between LATAM and said holders of more than 70% of unsecured parent company claims, holders of approximately 48% of U.S. bonds dated 2024 and 2026, and certain shareholders holding more than 50% of the common shares, subject to execution of definitive documentation by the parties and obtaining corporate approvals from these shareholders.
As they have done throughout the entire process, all companies in the group continue to operate in accordance with permitted travel and demand conditions.
The hearing to approve the adequacy of the Chapter 11 Disclosure Statement and voting procedures is scheduled to be held in January 2022, with a specific timing that will depend on the Court.
If the Disclosure Statement is approved (Disclosure Statement), the group will begin the application process to seek creditor approval of the plan. LATAM requests that the hearing to confirm the plan be held in March 2022.
LATAM is being advised in this process by Cleary Gottlieb Steen & Hamilton LLP and Claro & Cia. as legal advisers, FTI Consulting as a financial adviser and PJT Partners as an investment banker.
Overview of the LATAM Recovery Plan
The Plan proposes the injection of US$ 8,19 billion ao group through a combination of new equity, convertible bonds and debt, which will allow the group to exit Chapter 11 with adequate capitalization to execute its business plan.
Upon exit, LATAM is expected to have total debt of approximately US$7,26 billion and liquidity of approximately US$2,67 billion. The Group has determined that this is a conservative debt level and adequate liquidity in a period of continued uncertainty for world aviation, which will better position the Group for future operations.
Specifically, the plan points out that:
After confirmation of the Plan, the group intends to launch a capital rights offering through the issuance of common shares worth US$800 million, which will be open to all LATAM shareholders, respecting their preemptive rights under Chilean law. effective, and which will be fully endorsed by the participants of the RSA, subject to the execution of definitive documentation and, with respect to the of the shareholders, the receipt of corporate approvals.
Three distinct classes of convertible bonds will be issued by LATAM, and will be offered preferentially to LATAM shareholders. To the extent that they are not subscribed by LATAM shareholders during the respective period of preemptive rights:
- Class A convertible bonds will be provided to certain unsecured general creditors of LATAM parent company as settlement for their claims allowed under the plan;
- Class B Convertible Securities will be entered into and purchased by the shareholders referenced above; and
- Class C convertible bonds will be offered to certain unsecured creditors in exchange for further capital contributions to LATAM and the settlement of their credit claims, subject to certain limitations and impediments on the part of the participants.
- The convertible bonds belonging to the Convertible Classes B and C will be provided, in whole or in part, in consideration of a new equity contribution in the aggregate amount of approximately $4,64 billion, fully backed by the parties involved in the RSA, subject to receipt of approvals corporate actions by the ing shareholders.
- LATAM will also raise US$500 million in a new revolving credit facility and approximately US$2,25 billion in debt financing through new resources, either through a new term loan or new bonds; and
- The group has also used, and intends to use, Chapter 11 to refinance and amend pre-trial lease agreements, the revolving credit facility and the replacement engine facility.
See it in a simplified way in the infographic below:
