Latam Airlines disclosure statement OK’d; plan hearings start May 17

By Sarah Lizee

Olympia, Wash., March 22 – Latam Airlines Group, SA received approval of the fifth amended disclosure statement for its Chapter 11 plan of reorganization, according to an order filed Monday with the U.S. Bankruptcy Court for the Southern District of New York.

The plan confirmation hearings are set for May 17 and May 18.

As previously reported, the plan proposes the infusion of $8.19 billion into the group through a mix of new equity, convertible notes and debt.

Upon emergence, Latam is expected to have total debt of around $7.26 billion and liquidity of roughly $2.67 billion.

Upon confirmation of the plan, the group intends to launch an $800 million common equity rights offering, open to all shareholders of Latam, in line with their preemptive rights under applicable Chilean law, and fully backstopped by the parties participating in the RSA.

Three distinct classes of convertible notes will be issued by Latam, all of which will be preemptively offered to shareholders of Latam. To the extent not subscribed by Latam's shareholders during the respective preemptive rights period:

Class A convertible notes will be provided to certain general unsecured creditors of the Latam parent in settlement of their allowed claims under the plan, class B convertible notes will be subscribed and purchased by shareholders, and class C convertible notes will be provided to certain general unsecured creditors in exchange for a combination of new money to Latam and the settlement of their claims, subject to some limitations and holdbacks by backstopping parties. The subscription ratio for class C convertibles is $0.921692 of new money for each $1.00 of claims.

The class A convertibles will total $1.47 billion, bear no interest and mature Dec. 31, 2121, with a conversion ratio of 0.193333.

The class B convertibles will total $1.38 billion in new money and mature on Dec. 31, 2121. Interest will accrue payable in cash at a rate of 1% per annum, provided that no interest will accrue during the first 60 days from the plan’s effective date. The conversion ratio is 1.159152x.

The class C convertibles will total $6.82 billion, which to the extent fully subscribed by unsecured creditors would require a new money contribution of $3.27 billion and acceptance of a settlement of their claims for $3.55 billion. The class C convertibles will bear no interest, mature Dec. 31, 2121 and carry a conversion ratio of 0.705506x.

The convertible notes belonging to classes B and C will be provided, totally or partially, in consideration of a new money contribution for $4.64 billion fully backstopped by the parties to the RSA.

Latam will raise a $500 million new revolving credit facility and $2.25 billion in total new money debt financing, consisting of either a new term loan or new bonds.

The group also used and intends to use the Chapter 11 process to refinance or amend its pre-petition leases, revolving credit facility, and spare engine facility.

The company is advised by Cleary Gottlieb Steen & Hamilton LLP and Claro & Cia. as legal advisers, FTI Consulting as financial adviser, and PJT Partners as investment banker.

The parent ad hoc group, which is led by Sixth Street, Strategic Value Partners, and Sculptor Capital, is advised by Kramer Levin Naftalis & Frankel LLP, Bofill Escobar Silva, and Coeymans, Edwards, Poblete & Dittborn as legal advisers and Evercore as investment banker.

The above referenced shareholders consist of Delta Air Lines, Inc., advised by Davis Polk & Wardwell LLP, Barros & Errazuriz Abogados, and Perella Weinberg Partners LP as legal counsel and investment banker; the Cueto Group and the Eblen Group, advised by Wachtell, Lipton, Rosen & Katz and Cuatrecasas as legal counsel; and Qatar Airways Investment (UK) Ltd., advised by Alston & Bird LLP, Carey Abrogados, and HSBC as legal counsel and investment banker. Some of these shareholders are advised in their individual capacity by Greenhill & Co., LLC and Asset Chile, SA as co-financial advisers.

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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