LATAM Airlines Secures $1.4 Billion to Reduce Debt

LATAM Airlines Group has successfully issued secured notes totaling USD 1.4 billion, maturing in 2030 with an annual interest rate of 7.875%. This strategic refinancing effort aims to lower the company’s cost of debt and generate approximately USD 83 million in annual savings through reduced interest payments, as detailed in a material fact filed with Chile’s financial market regulator, Comisión para el Mercado Financiero (CMF).

With the funds raised from this issuance, along with USD 200 million in cash, LATAM Airlines (LA) plans to prepay a USD 450 million note due in 2027, which carries an interest rate of 13.375%. Additionally, the airline will address the Term Loan B of USD 1.081 billion, also due in 2027, with an interest rate of about 15%. Both financing sources were part of LATAM’s exit strategy from Chapter 11 bankruptcy in 2022.

The airline is further committed to reducing its gross debt levels, which stood at USD 7.1 billion at the end of the second quarter. LATAM has another set of 13.375% senior secured notes worth USD 700 million due in 2029, with opportunities for refinancing as indicated in its second-quarter financial results.

In terms of financial performance, LATAM Airlines reported USD 6.35 billion in overall operating revenue for the first half of 2024, achieving a net profit of USD 390 million. These figures represent increases of 15.9% and 30.8%, respectively, compared to the same period last year. The issuance of secured notes is expected to have a one-time impact on LATAM’s income statement of approximately USD 134 million, with USD 45 million reflected in cash movements during the fourth quarter of 2024.

This proactive approach to managing debt positions LATAM Airlines for future growth while enhancing its financial stability in the competitive aviation market.

Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com