Latam Airlines gets exit financing proposals for over $5 billion

By Sarah Lizee

Olympia, Wash., Sept. 10 – Latam Airlines Group, SA disclosed some details of its ongoing negotiations relating to its potential restructuring Thursday in a 6-K filed with the Securities and Exchange Commission.

Latam Airlines said that in connection with the negotiations, it had provided an indicative proposed structure for its reorganization, which sought about $5 billion of equity financing, and contemplated a consensual plan.

As of Thursday, the company said it has received some non-binding exit capital and financing proposals from its most significant claimholders and its majority shareholders. Each one contemplates raising more than $5 billion of new funds through the issuance of new debt and equity, which would be backstopped by the parties making the proposal.

The proceeds of the exit capital raise will be used to repay the company’s debtor-in-possession financing facility and to finance its operations, including for general corporate purposes, capital expenditures, working capital, and payments related to the company’s exit from Chapter 11.

The company said that it will continue to discuss the exit proposals with their respective proponents, and will continue to engage in discussions regarding its reorganization plan with those proponents and other stakeholders, some of whom have agreed to remain under non-disclosure agreements.

The company noted that while discussions are ongoing, it has not yet reached an agreement regarding the terms of a potential restructuring transaction.

Potential plan terms

Under the illustrative plan terms, the company’s proposed exit capital structure would include $3 billion of finance leases, $2 billion of operating leases, a $600 million refinanced or extended revolving credit facility, a $273 million refinanced or extended spare engine facility, $300 million of refinanced or extended Brazil debt, and $2.84 billion of cash.

Proceeds from the restructuring transactions will add $1.81 billion of cash to the balance sheet, repay $1.44 billion under the DIP tranche A and $1.45 billion under the DIP tranche C, and repay $300 million in administrative claims incurred as part of the Chapter 11 process.

Any remaining funds, including cash raised through the preemptive rights offering and unsecured rights offering, will be provided as part of recoveries to unsecured creditors under the plan.

Exclusivity extension

The company also said it filed a motion seeking an extension of its exclusive periods to file and solicit votes on a Chapter 11 plan.

Specifically, the company asked the court to extend the plan filing period through Oct. 15 from Sept. 15 and the solicitation period through Dec. 15 from Nov. 8.

Latam Airlines said the request will support the development of a plan that satisfies equity and debt needs, and will assist in the negotiation with the various stakeholders in the Chapter 11 proceeding.

Tranche B DIP funding

The company also said that, in order to take advantage of favorable market conditions, it is requesting proposals from parties interested in providing financing under tranche B of its DIP credit agreement.

The DIP credit agreement provides for a possible tranche B for up to $750 million, in addition to the existing $1.3 billion tranche A facility and the $1.15 billion tranche C facility.

The company said it continues to have availability under the tranche A and tranche C facilities, for $424.5 million and $375.5 million, respectively.

Latam is a Santiago, Chile-based airline. The company filed bankruptcy on May 25, 2020 under Chapter 11 case number 20-11254.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.