LATAM Airlines Group boosts support for its exit plan

LATAM Airlines Group is seeking to refinance a portion of the debt acquired during its bankruptcy, according to a lawyer for the South American airline group.

Citing Lisa Schweitzer of Cleary Gottlieb Steen & Hamilton, the holding’s lawyers, during a bankruptcy hearing before the US Bankruptcy Court in the Southern District of New York on February 11, Bloomberg reports that LATAM intends to file court documents related to the refinancing by February 17, given that the debt in question is due in April.

As reported earlier, LATAM’s restructuring plan foresees the infusion of USD8.19 billion into the group through a mix of new equity, convertible notes, and debt. This will give LATAM liquidity of USD2.67 billion and total debt of USD7.26 billion once it emerges from Chapter 11.

Meanwhile, LATAM in a statement revealed a second amendment made on February 10 to its Chapter 11 bankruptcy exit plan – the Restructuring Support Agreement (RSA) of November 26, 2021 – to incorporate current members of the so-called Ad Hoc Group of bondholders represented by White & Case LLP (W&C). These included holders of unsecured US bonds issued by LATAM Finance due in April 2024, amounting to USD700 million; and holders of unsecured US bonds issued by LATAM Finance due in March 2026, amounting to USD800 million.

In line with the amendment, these Ad Hoc Group members have agreed, amongst other things, to endorse LATAM’s plan of reorganisation. They have withdrawn their objection to the debtors’ disclosure statement and have agreed not to take any further action inconsistent with the rescue plan, and to instruct W&C to withdraw its motion for substantial contribution that was filed with the Bankruptcy Court. “Moreover, the Ad Hoc Group of bondholders has agreed to settle its objections to the debtors’ plan of reorganisation, disclosure statement, and other pending motions,” the company said.

For its part, LATAM has agreed to pay legal and professional fees of the Ad Hoc Group of bondholders on the effective date of the reorganisation plan.

Before the second amendment, the exit plan already had the support of creditors representing more than 70% of LATAM’s outstanding claims; bondholders representing about 48% of LATAM Bonds 2024 and LATAM Bonds 2026; and certain shareholders holding more than 50% of LATAM’s common stock. Now, with the execution of this second amendment to the RSA, LATAM’s exit plan has the support from more than 67% of the LATAM Bonds 2024 and LATAM Bonds 2026, the company said.

Meanwhile, Law 360 reports heated discussions during a two-day hearing in the US Bankruptcy Court last week over the backstop financing agreement in LATAM’s Chapter 11 exit plan under which shareholders and a group of creditors led by Evercore Group LLC have pledged to backstop the plan’s USD5.4 billion equity offering.

LATAM accused the objecting creditors of adopting an overly narrow view of the proposed backstop arrangement to exaggerate the size of the fees the backstopping creditors would receive, while the objectors argued that LATAM was attempting to minimise the fees by taking an excessively broad view.