Latam’s TAM unit calls 8 3/8% notes due 2021, to sell 2022, 2028 notes

By Marisa Wong

Morgantown, W.Va., July 28 – Chile’s Latam Airlines Group SA said TAM Capital 3 Inc., which is controlled by TAM SA through its affiliated company TAM Linhas Aereas SA and consolidates its financial statements with Latam, has announced the redemption of any and all of its 8 3/8% senior notes due June 3, 2021 for a total amount of $500 million.

Funding for this transaction will be partially sourced from the issuance of $350 million of local Chilean UF-denominated notes with maturities in 2022 and 2028, while the balance will come from other financing activities and from Latam’s cash balance.

Latam said this liability management transaction will further optimize its capital structure, while maintaining its strong cash position. This represents positive news for Latam; the transaction will provide financial savings by calling the notes with the highest coupon, 8 3/8%, and will reduce the financial obligations for 2021 by $500 million while extending the existing debt maturity profile, according to a press release.

Latam said that once these transactions are completed, it will have concluded the refinancing process of the TAM legacy bonds issued prior to the business combination between Chile’s LAN airline company and TAM. This process started in 2015 with the liability management of the $500 million 9½% senior notes due 2020 issued by TAM Capital 2 Inc. and more recently with the final payment in April 2017 of the $300 million 7 3/8% senior notes due 2017 issued by TAM Capital Inc.

“These transactions will result in a stronger overall balance sheet structure for Latam. We will benefit from significant savings and an improved repayment profile, and in combination with other financing initiatives already completed, including the successful issuance of the previously announced US$700 million senior unsecured notes, we are in a much stronger financial position than one year ago,” Ramiro Alfonsin, chief financial officer of Latam, said in the press release.

The airline is based in Santiago.

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