Last Tuesday (15/03), the US courts approved an agreement between the LATAM Group and the company's creditors, guaranteeing financing of US$ 5,4 billion for the company through equity and debt offerings.
Judge James Garrity mediated the approval of LATAM's agreement with creditors, called "Backstop", where 15 entities will receive US$ 734 million in fees from the company, to guarantee the restructuring as in the Plan presented by the LATAM Group.
"Opponents have not refuted the presumption that entry into backstop arrangements is a proper exercise of debtors' business judgment"said the judge in his 85 page decision.
Two groups of junior creditors objected to the backstop arrangement, including the airline's official committee of unsecured creditors. The committee argued that the fees the group, which includes Strategic Value Partners, Sixth Street Partners and Olympus Peak Asset Management, would charge are "extraordinarily large" and that the airline should have considered less expensive options.
In addition, the committee argued that the settlement unfairly favors shareholders, including Delta Air Lines Inc, over smaller creditors.
Judge Garrity said the fees are reasonable considering the risk backstop lenders are taking by g on to secure funding for such large rights offerings.
Garrity also approved an agreement with existing shareholders, including Delta, to back $400 million in a common stock offering and up to $1,3 billion in a debt offering. This agreement does not include fees, but provides legal protections and refunds for shareholders.
The Plan proposes the injection of US$ 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 departure, LATAM estimates that it should have total debt of approximately US$7,26 billion and liquidity of approximately US$2,67 billion.
With information Reuters.
