LATAM clinches $750mn additional bankruptcy exit financing

LATAM Airlines Group has announced it has obtained additional financing proposals totalling USD750 million from a group of financiers composed of Oaktree Capital Management L.P., Apollo Management Holdings L.P., and certain funds, accounts, and entities advised by them.

In a notice to investors, the group said the deal was still subject to approval from the Bankruptcy Court for the Southern District of New York. LATAM Airlines Group and its affiliates in Chile, Colombia, Ecuador, the United States, Peru, and Brazil filed for voluntary protection under the US Chapter 11 on May 26, 2020, after serious consequences of the COVID-19 pandemic.

The company said this additional Tranche B of debtor-in-possession (DIP) financing would be available at more competitive rates and conditions than those obtained for its existing tranches (Tranches A and C), allowing the group to improve its cost of financing while under Chapter 11 bankruptcy protection. LATAM already has access to USD2.45 billion in DIP financing under the first two tranches, of which it has drawn USD1.65 billion to date.

The resulting DIP financing structure was now as follows:

Tranche A, which comprises up to USD1.3 billion of committed funds;
Tranche C, with up to USD1.15 billion of committed funds; and
Tranche B of up to USD750 million of committed funds.
After receiving multiple Tranche B offers from investors, the LATAM Board on September 24 had unanimously voted in favour of the current financing proposal which would result in significant savings for the group. “This proposal will allow us access to better financing conditions, generating significant cost savings and benefiting our creditors and LATAM”, said LATAM Airlines Group Chief Financial Officer, Ramiro Alfonsín.

LATAM said it could eventually receive other proposals to grant financing under Tranche B of the DIP Credit Agreement, in which case they would be duly assessed by the company and its advisors.

Through the Chapter 11 process, LATAM and its affiliates aim to restructure their operations and reorganise their balance sheets. The group recently released its five-year business projection, which it said marked one of the final stages before the presentation of its plan of reorganisation. LATAM forecasts recovering 2019 profitability by 2024, and a 78% operational result increase by 2026 when compared to pre-pandemic figures in 2019.