U.S. court releases Latamine judicial recovery plan for voting

SAO PAULO – A US court this Monday approved the disclosure report of Latam Airlines ‘restructuring plan, allowing the company to take the document to a creditors’ vote. The trial is set to begin on May 17 and 18.

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The move is as important to Latham as it is to Chapter 11 in the United States, as in the case of the Brazilian judicial reform.

Latham’s recovery plan was delivered in November last year. Amid drastic reductions in demand caused by the epidemic, the company filed for bankruptcy protection in July 2020. The group’s debt at the time was $ 18 billion.

“The voting process on the restructuring plan is expected to begin in the coming weeks (…), by which time it will receive its approval,” Latham announced. The airline predicts a judicial recovery from the second half of this year.

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Last week, the same court approved US $ 3.7 billion in new DIPs (owned by creditors, giving full priority to receivables) already issued to the company by Latam shareholders and lenders. It also approved an extension of the first DIP fee from April to October.

The new capital infusion will be largely funded by JPMorgan, which has subscribed to Tranch A and will provide US $ 2 billion in financing at a rate of 7.5% interest until October. The remaining $ 1.7 billion is owned by TransC, Ladamin’s major shareholders (Chile’s Kyoto family and Delta & Qatar Airlines) and a group of lenders known as Evercore, which represents 70% of the company’s claims.

The new feature comes at a time when the aviation industry in the midst of the war in Ukraine is particularly hard pressed by volatile oil prices.

In Brazil, Latam and other companies have already restructured ticket prices and reduced the offer of flights to cope with the new situation. Until then, there were plans to resume demand for pre-Govt domestic aviation this quarter.

Last week, the court approved agreements that would provide Latam with capital-raising action aimed at raising $ 5.4 billion at the end of the judicial recovery process. This amount will be funded by LATAM’s lenders and shareholders, the latter being preferred, which may also raise questions from creditors.