Latam Airlines Group, earlier this Saturday (27), announced a reorganization plan to exit Chapter 11 of the US Bankruptcy Code. According to a statement from the company, the plan is accompanied by a Restructuring Support Agreement (RSA) with the Matrix’s designated group of creditors, the largest group of unsecured creditors in these Chapter 11 cases, and some Latam shareholders.
The plan proposes injecting $8.19 billion into the group through a combination of new equity, convertible assets and debt, which will allow the group to exit Chapter 11 with sufficient capital to implement its business plan, the statement says.
After exit, the document continues, Latam should have a total debt of approximately $7.26 billion and liquidity of approximately $2.67 billion. “The Group has determined that this represents a conservative level of indebtedness and sufficient liquidity in a period of continued uncertainty for global aviation, which will allow the Group to be better positioned for future operations,” the statement read.
Following confirmation of the plan, the Group intends to launch a capital rights offering by issuing ordinary shares in the amount of US$800 million, which will be open to all Latin American shareholders, respecting their purchasing rights under current Chilean law, and which will be fully backed by RSA participants.
The document also states that three distinct classes of convertible bonds will be issued by Latam, and will be offered preferentially to the company’s shareholders.
Unwritten Class A Convertible Debentures will be offered to certain unsecured general creditors by LATAM’s parent company as settlement of their claims permitted under the Plan; Class B convertible bonds will be registered and purchased by the shareholders and Class C convertible bonds will be offered to certain unsecured creditors in exchange for further capital contributions to LATAM and settlement of its credit claims, subject to certain restrictions and impediments on the part of the participants.
The document also states that Class B and C convertible bonds will be offered, in whole or in part, against a new capital contribution in the aggregate amount of approximately $4.64 billion, fully backed by the RSA participating parties, subject to receipt of corporate approvals by supportive shareholders.
Latam will also raise $500 million in a new revolving credit facility and approximately $2.25 billion in debt financing through new resources, either through a new term loan or through new bonds; The Group has also used and intends to use Chapter 11 to refinance and modify pre-operation leases, revolving credit facility and post-sale drive facility.
The hearing to approve the adequacy of the Chapter 11 disclosure statement and voting procedures is scheduled for January 2022, with a specific timeline dependent on the court.
“If the disclosure statement is approved, the group will begin the application process for creditors’ approval of the plan. Latam requests that the plan confirmation hearing take place in March 2022,” the statement continues.
Latam has created a specific website (www.latamreorganizacion.com/pt-br/), where interested parties can find additional information.
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