O LATAM Group informs that, after an exhaustive process of searching for the best conditions available for its exit financing from the Chapter 11 process, it signed financing commitment letters with several financial entities, which represents a sign of confidence of the market in LATAM and allows the group take another step towards its exit from the Chapter 11 process in the second half of 2022, with a more solid financial structure.
Exit financing is part of the restructuring contemplated in the Reorganization Plan and considers new debt of US$2,25 billion and the provision of a new credit facility of US$500 million, and is subject to US Court approval.
The financial entities with which the financing commitment letters were signed are: JPMorgan Chase Bank, NA, Goldman Sachs Lending Partners LLC, Barclays Bank PLC, BNP Paribas, BNP Paribas Securities Corp., and Natixis, New York Branch.
"This commitment assures us of the total financing necessary to complete our restructuring plan and, very importantly, with a degree of flexibility that allows us to optimize existing market conditions. The US$2,25 billion is in addition to the US$5,4 billion of capital we secured in January of this year. This is another important step towards exiting Chapter 11 as a stronger Airline Group."Says Roberto Alvo, CEO of LATAM Airlines.
The exit funding commitment letters also contemplate funding of $1,172 billion that will be provided during the life of the Chapter 11 process (i.e. prior to exit) in the form of DIP (debtor in possession) funding with priority lower payment than the exit financing (“Junior DIP Financing”).
The financial entities with which the commitment letter for DIP Junior Financing was signed are: Delta Air Lines, Inc., Lozuy SA, Costa Verde Aeronáutica SA, QA Investments Limited, and of the ad hoc group of LATAM creditors represented by evercore.
The exit funding was structured as DIP (debtor-in-possession) funding to be awarded during the Chapter 11 process. which, subject to the fulfillment of certain conditions customary for this type of operation, will remain in effect after LATAM withdraws from the Chapter 11 process.
As a result, to the extent such conditions are met, Exit Financing will automatically be converted to Term Financing on the exit date of the Chapter 11 process. upon exiting the Chapter 11 Process.
Proceeds from Exit Financing and Junior DIP Financing will be partially used to fully amortize the Existing DIP Financing during the term of the Chapter 11 process.
The exit financing was structured as follows:
- US$ 500 million for a revolving credit line (Exit Revolving Facility), which will incur interest, at LATAM's choice, according to the following alternatives: (i) ABR plus applicable margin of 3%; or (ii) Adjusted Term SOFR plus applicable margin of 4%.
- US$ 750 million for term financing (term B loan exit (Term B Loan Facility), which will bear interest, at LATAM's choice, according to the following alternatives: (i) ABR plus applicable margin to be determined at the time of contracting; or (ii) SOFRA at an Adjusted Term plus the applicable margin to be determined at the time of contracting.
- US$750 million for a bridge loan for the issuance of 5-year bonds.
- US$750 million for a bridge loan for the issuance of 7-year bonds.
The interest rate on the aforementioned bridge loans will be determined based on market conditions available at the time of closing, subject in any case to certain limits established in the financing commitment letters.
In addition, LATAM is awaiting the decision of the US Court for its Reorganization Plan, which has the substantial of creditors representing 90% of LATAM Airlines Group's unsecured claims.
This was possible after an agreement with the holders of securities issued in Chile (including those represented by BancoEstado), the Official Committee of Unsecured Creditors (UCC), the Ad Hoc Group of LATAM creditors (led by Sixth Street, Strategic Value Partners and Sculptor Capital) and the main shareholders of the group (Delta Air Lines, Qatar Airways, Grupo Cueto).
