Delta rejigs LATAM Airlines Group, Aeromexico ownership

Delta Air Lines (DL, Atlanta Hartsfield Jackson) is re-organising its shareholding in Grupo Aeroméxico and the LATAM Airlines Group along with the respective Chapter 11 restructuring plans of both airlines.

This is accompanied by a total investment of about USD1.2 billion by Delta in Aeroméxico, LATAM, and Virgin Atlantic (VS, London Heathrow) – punted as Delta bolstering its global platform as international travel ramps up after COVID-19.

Upon completion of their respective Chapter 11 processes, Delta is targeting a 20% equity stake in Aeroméxico and a 10% equity stake in LATAM. Its 49% equity stake in Virgin Atlantic will remain unchanged despite an investment of GBP400 million pounds (USD529 million) in the UK airline, as will its investments in Air France-KLM, Korean Air, and China Eastern Airlines, the airline said in a statement to investors.

“These strategic investments in our partners will transform our ability to improve the travel experience for our customers, enabling us to deliver a seamless travel experience alongside offering our customers an unrivalled network between North American and premier markets worldwide,” commented Delta Chief Executive Officer Ed Bastian. “The work each of our partners has done to strengthen their businesses for the future makes these partnerships even more valuable and creates a new era of international travel to benefit our customers, our employees and our investors as global travel rebounds in 2022 and beyond.”

Delta will substantially reduce its shareholding in LATAM from a current 19.99% to 10% and will have one member on LATAM’s post-emergence board, according to a filing with the US Securities and Exchange Commission (SEC) on December 13, 2021.

This is in line with approval on December 9, 2021, by Delta’s board of the airline’s participation in the recapitalisation of LATAM as envisaged in the Latin American airline group’s restructuring plan signed-off by shareholders on November 26, 2021. Delta’s has not disclosed its own contribution, but the plan involves a rights offering consisting of a common stock rights offering and separate rights offerings for three tranches of unsecured notes convertible into shares; a USD500 million new revolving credit facility; and USD2.25 billion in other new debt financing.

Apart from Delta, other shareholders involved in the recapitalising restructuring plan of LATAM include the Cueto group (Costa Verde Aeronáutica S.A. and Inversiones Costa Verde Ltda. y Cia. en Comandita Por Acciones), Qatar Airways, the Eblen group (Andes Aérea SpA, Inversiones Andes SpA, and Comercial Las Vertientes SpA) and certain members of a so-called Ad Hoc Group of LATAM parent claim holders.

Delta and LATAM are seeking approval from the US Department of Transportation (DOT) for a trans-American Joint Venture Agreement (JVA) that will combine the carriers’ route networks between North and South America. Following Chilean Court approval of the JVA in October this year, Delta and LATAM expanded their existing codeshares to improve connectivity between North and South America.

Meanwhile, Delta will reduce its shareholding in Aeroméxico from 49% to 20% for an injection of USD100 million of new shares, representing 20% of the capital stock of the reorganised group. This forms part of the Mexican carrier’s Chapter 11 bankruptcy restructuring plan.

The US Bankruptcy Court on December 13, 2021, issued an order extending until December 30, 2021, the exclusivity period during which Aeroméxico may file its final restructuring plan and extended until February 28 the exclusive solicitation period.

As reported, this follows an objection to Aeroméxico’s proposed financing plan by a group of US creditors referred to as the “Ad Hoc Group”, who assert that their alternative proposal has not been considered despite being a better deal for unsecured creditors. The Ad Hoc Group comprises Invictus Global Management, LLC; Corvid Peak Capital Management, LLC; Hain Capital Group, LLC; and Livello Capital Management, LP.

On December 10, Aeroméxico announced the Bankruptcy Court had entered an order approving the disclosure statement with respect to its existing USD5.4 billion restructuring plan. This means, Aeroméxico now has court approval to solicit votes on the plan.

Delta and Aeroméxico launched a Joint Cooperation Agreement (JCA) in 2017, which has resulted in a trans-border route network of more than 40 routes from their main hubs.