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Latam Airlines unsecured committee concerned over plan term sheet
By Sarah Lizee
Olympia, Wash., Sept. 17 – Latam Airlines Group, SA’s official committee of unsecured creditors shared concerns over the company’s plan term sheet Friday in documents filed with the U.S. Bankruptcy Court for the Southern District of New York.
The group said the company’s plan term sheet proposes to cash out unsecured creditors at “plan value,” without paying them in full, through an exclusive rights offering to existing equity holders.
“The proposed plan structure approximates the one this court rejected at the DIP financing stage, except that shareholders would buy the equity with cash rather than through a conversion of the DIP financing,” the committee said.
“The plan would give all of the equity upside from the pandemic recovery to the equity holders based solely on their status as shareholders, and place the risk of low plan valuation on the creditors’ shoulders.”
The committee said that because it has only limited access to the debtors’ strategic planning and intentions, it does not know with certainty whether the company’s plan filing and solicitation exclusivity is being used simply to pressure creditors to accede to the debtors’ point of view on their interpretation of the purported requirements of Chilean law or is based on a good faith desire to use exclusivity to appropriately balance creditor and shareholder interests.
“Although the committee continues to have concerns that the debtors are inappropriately dominated by their shareholders, the committee intends to continue working with the debtors to secure a reorganization,” the group said.
Latam is a Santiago, Chile-based airline. The company filed bankruptcy on May 25, 2020 under Chapter 11 case number 20-11254.
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