US court approves LATAM’s revised financing plan

The US Bankruptcy Court for the Southern District of New York has approved a revised debtor in possession (DIP) financing plan submitted by LATAM Airlines Group. Compared to the rejected original, this version entails scaled-down contributions from Oaktree Capital and other existing shareholders in favour of new creditors. According to the new proposal, the total capital injection would remain unchanged at USD2.45 billion. LATAM Airlines said that the “terms of the Revised DIP Financing Proposal maintain, in essence, the structure of the Original DIP Financing Proposal”. However, Oaktree Capital is now due to provide USD1.125 billion instead of USD1.3 billion as per the original proposal. The remaining USD175 million of Tranche A will be provided by Knighthead Capital Management, Jefferies Finance, and/or other entities that are part of a creditors’ syndicate organized by Jefferies. None of these entities would have participated in the recapitalisation drive under the original plan. Tranche B of the financing still amounts to USD1.15 billion. However, a group of LATAM’s shareholders comprising the Cueto Group, the Eblen Group, and Qatar Airways (QR, Doha Hamad Int’l) will contribute USD750 million instead of USD900 million. USD250 million will be provided by Knighthead, Jefferies, and/or other entities that are part of a creditors’ syndicate organized by Jefferies and a further USD150 million by other existing or new shareholders. In case the last part of the tranche is not injected, the additional USD150 million would come from the other named parties. Crucially, the holding abandoned its earlier plan to convert unrepaid loans into shares at a significant discount. It pledged instead to repay all debts in cash. The court previously objected to allowing existing shareholders the option of acquiring shares at a discount in case the airline was unable to repay loans. LATAM Airlines said that all named parties had expressed interest in the financing’s structure. Knighthead, Jefferies, and a committee of creditors organised by Jefferies had objected to the original setup. The new proposal was submitted to the court on September 16 and subsequently approved by Judge James L. Garrity Jr. on September 19.