Latam Airlines gets OK of fleet settlements; objections overruled

By Sarah Lizee

Olympia, Wash., Feb. 17 – Latam Airlines Group, SA’s motion seeking approval of two plane lease settlement agreements was approved on Thursday by the U.S. Bankruptcy Court for the Southern District of New York, which overruled objections from the official committee of unsecured creditors and the trustee for the company’s series A through E Chilean bonds.

As previously reported, the two plane lease settlement agreements allow for about $1.41 billion in general unsecured claims in favor of Sajama Investments, LLC and Strategic Value Partners.

On Nov. 26, the debtors entered into a restructuring support agreement with a group of creditors known as the Evercore Group.

Banco del Estado de Chile, as bond trustee, said that in exchange for their vote, the Evercore Group is slated to receive $1.3 billion in excess value, including $734 million in backstop fees and $427 million in excess allocation of the convertible notes being offered under the plan.

The trustee said that shortly after entering in the RSA and filing the plan, the company filed the settlement motions, which include the largest members of the Evercore Group – Sajama and SVP.

“In addition to further unjustly enriching the claimants at the expense of other creditors (the claims carry all the backstop and other favorable plan economics that the Evercore Group negotiated under the RSA), the stipulated claim amounts, which include approximately 40% of the Evercore Group’s total claims against Latam Parent, will ensure that the Evercore Group, as a whole, holds enough claims to carry the vote in class 5 of the plan against the will of other general unsecured creditors, including the Chilean bondholders, whom the debtors have strategically placed in that same class,” the bond trustee had said.

“The fleet settlements are the result of a dubious negotiating process, in which the debtors’ motivation to limit the claimants’ claims to fair and reasonable amounts was directly at odds with their goal to reach agreement with those same claimants regarding the terms of a plan,” the committee had said in its objection.

“The resulting settlement cannot be justified on any reasonable assessment of the merits, and is at odds with the interests of non-preferred general unsecured creditors.”

Latam Airlines 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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