Latam Airlines eyes further amendments to $3.3 billion DIP financing

By Sarah Lizee

Olympia, Wash., March 7 – Latam Airlines Group, SA is seeking court approval of further amendments to its $3.3 billion of debtor-in-possession financing, according to a motion filed Monday with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, chief financial officer Ramiro Alfonsin Balza said that in view of the approaching maturity date of the initial DIP facilities, the debtors began exploring in January and February the opportunity to obtain financing for the remainder of the Chapter 11 cases, which are expected to extend for several months after the initial maturity date of the loans.

The debtors are now seeking approval of an amended and restated DIP facility, including a replacement tranche C facility, which will allow the debtors to access up to $3.3 billion in liquidity on terms more favorable than under any available alternative.

The financing consists of a $1.3 billion trance A facility, a $750 million tranche B facility and a $1.25 billion replacement tranche C facility.

According to Monday’s motion, interest on the tranche A loans whose interest is payable in cash at the end of each interest period was increased to Libor plus 975 basis points. Interest on tranche A loans whose interest is capitalized on a quarterly basis for payment on the maturity date was increased to Libor plus 1,100 bps from Libor plus 950 bps.

Interest on the tranche C loans was increased to Libor plus 1,500 bps from Libor plus 1,200 bps.

Interest on the tranche B loans remains Libor plus 950 bps.

The replacement tranche C lenders are certain funds managed by Oaktree Capital Management, LP, Apollo Capital Management, LP, QA Investments Ltd., Costa Verde Aeronautica SA, Lozuy SA and Delta Air Lines, Inc.

The DIP agents are Bank of Utah as administrative agent, Banco Santander Chile as Chile local collateral agent, TMF Brasil Administracao e Gestao de Ativos Ltda. as Brazil local collateral agent, TMF Colombia Ltda. as the Colombia local collateral agent, TMFEcuador, SA as Ecuador local collateral agent and Fiduperu SA Sociedad Fiduciaria as Peru local collateral agent.

The debtors will pay an additional fee equal to 1% of the drawn and undrawn commitments of each tranche A, B and C lender that qualifies as an Apollo or Oaktree lender, which will be earned in full on the closing date of the proposed amended and restated DIP credit agreement.

It will be a condition to funding that the court has entered into a disclosure statement order and backstop approval order.

“Latam is still operating substantially below its pre-crisis passenger capacity,” the CFO said in a declaration.

“The continued impacts of Covid-19 have made it necessary for Latam to have access to DIP financing to partially fund its operational and other needs during the pendency of these proceedings absent further market improvements.”

A hearing is scheduled for March 10.

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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