Latam Airlines lines up DIP, exit loans; eyes emergence by year-end

By Sarah Lizee

Olympia, Wash., June 14 – Latam Airlines Group, SA has signed commitment letters for $2.75 billion in exit financing, according to court documents filed with the U.S. Bankruptcy Court for the Southern District of New York.

The financing will be structured as:

• A $500 million exit revolver that will accrue interest at Latam's election, either ABR plus 300 basis points, or SOFR plus 400 bps;

• A $750 million term B loan facility, which will accrue interest at Latam's choice, either ABR or SOFR plus an applicable margin to be determined at time of allocation;

• A $750 million bridge to five-year notes facility; and

• A $750 million bridge to seven-year notes facility.

The interest rate for the bridge loans will be determined based on market conditions available at the time of closing.

The company said in a press release issued Saturday that it plans to exit the Chapter 11 process during the second half of 2022 with a solid financial structure.

The financing, which is subject to court approval, is with JPMorgan Chase Bank, NA, Goldman Sachs Lending Partners LLC, Barclays Bank plc, BNP Paribas, BNP Paribas Securities Corp. and Natixis, New York Branch.

The debt is in addition to the $5.4 billion of equity the company secured in January.

The exit financing commitment letters also provide for $1.17 billion in financing to be provided during the life of the Chapter 11 process prior to exit in the form of a junior debtor-in-possession financing with a lower repayment preference than the exit financing.

The financial institutions with which the commitment letter for the junior DIP financing was entered into are Delta Air Lines, Inc, Lozuy SA, Costa Verde Aeronautica SA, QA Investments Ltd. and members of Latam's informal group of creditors represented by Evercore.

The exit financing has been structured as a DIP financing to be provided during the Chapter 11 process. Unlike the DIP financing currently in place, it has been structured so that, subject to the satisfaction of certain conditions, it will remain in place after Latam's emergence from the Chapter 11 process.

To the extent those conditions are met, on the exit date from the Chapter 11 process, the exit financing will automatically convert into a financing that will remain in place thereafter.

This doesn’t apply to the junior DIP financing, which must be fully repaid prior to the exit from the Chapter 11 proceeding.

The proceeds from the exit financing and the junior DIP financing will be used in part to repay the existing DIP financing in full during the Chapter 11 process.

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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