Latam Airlines stakeholders lodge objections to Chapter 11 plan

Chicago, May 2 – Latam Airlines Group, SA’s Chapter 11 plan was objected to by various stakeholders, according to multiple filings with the U.S. Bankruptcy Court for the Southern District of New York.

777 Components

From lease claimants holding four claims totaling approximately $62 million, there was a limited objection.

The lease claimants assert that in one part of the plan they are entitled to full satisfaction under the plan as administrative expense claims.

However, competing language in the document states that disputed claims may not be covered and will be left to the discretion of the debtor.

The 777 lease claimants suggest alternative language for the disputed claims section that would cover their claims under a proposed requirement (rather than discretionary language) for reasonable reserves.

If the language is changed, the lease claimants would support the plan.

TLA claims

An ad hoc group of holders of certain claims against TAM Linhas Aereas SA submitted an objection to the Chapter 11 plan in a separate filing.

The objection, as the claimholders fall under class 6 of the plan, is that the group is entitled to post-petition interest.

However, the plan denies them that interest.

The group argues that this makes them an impaired class, rather than an unimpaired class – even though class 6 will receive all of the principal amount of their claims.

As an impaired class, by the group’s argument, they should have a right to vote on the plan.

Shareholder claim

Columbus Hill Capital Management, LP, manager of funds owning 12 million shares of common stock of Latam Airlines Group, SA, also filed an objection the plan.

The fund manager states that the plan violates fundamental principles of Chilean law.

The plan, it argues, violates Chilean law as it proposes to issue new shares under class A and class C notes to unsecured creditors at lower prices and on better terms than those offered to existing shareholders during the preemptive rights offering period.

The plan also does not provide for expert valuations of the claims that will be tendered in exchange for new parent shares underlying new convertible notes.

The fund has a problem with the plan only providing for a majority vote of the shareholders attending the shareholders meeting to approve the notes underlying the convertible bonds.

Additionally, new convertible notes class B would be offered to controlling shareholders on better terms than those offered to existing shareholders.

The plan, with the way it is structured, the fund argued, would not be enforceable in Chile.

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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