LATAM BRAZIL ENTERS CHAPTER 11 AND GROUP FORMALISES SECOND TRANCHE OF DIP FINANCING

LATAM Airlines Group announced its formal DIP (debtor-in-possession) financing at the same time as it announced that LATAM Brazil was also entering the Chapter 11 bankruptcy protection process alongside its affiliates in Chile, Peru, Colombia, Ecuador and the United States, which filed on May 26, 2020.

The airline group stated that the decision for LATAM Brazil to file for bankruptcy protection was “a natural step in light of the continuing COVID-19 pandemic and offers the best option to access to the proposed DIP financing that will provide the tools to adapt to this new reality”.

On July 9, 2020, LATAM presented the second tranche (Tranche A) of its DIP financing proposal to the Court of the Southern District of New York, as part of the Chapter 11 process.

Tranche A amounts to US$1.3 billion that was committed by Oaktree Capital Management and its affiliates. This proposal must be reviewed and approved by the court in the coming days.

Tranche A complements Tranche C, which comprises US$900 million that was committed by shareholders Qatar Airways and the Cueto and Amaro families when LATAM and its affiliates in Chile, Colombia, Peru, Ecuador and the United States filed for Chapter 11 in May 2020.  Tranche C includes an upsize of US$250 million that will enable other shareholders in Chile to participate, once it is approved by the court.

Combined, Tranches A and C meet LATAM’s financing requirements in the context of the COVID-19 crisis and, as a result, it is hoped that financial support will not be required from governments. Nonetheless, LATAM Airlines Brazil will continue advancing negotiations with Brazil’s National Bank for Economic and Social Development (BNDES).

“Today, LATAM has taken a significant step in ensuring its operational continuity by securing the commitment of Oaktree Capital Management and its affiliates for the total financing of Tranche A. We hope that, together with Tranche C, it will be approved by the court in the coming weeks,” said Roberto Alvo, chief executive of LATAM Airlines Group.

“The support of two of our principal shareholders has been essential, sparking an interest and commitment from investors that we did not have a month ago. This show of confidence in the group’s future has enabled us to secure all the resources that are required to continue operating during the crisis and as demand recovers, to successfully complete the Chapter 11 process.”