Latam takes new financing to exit judicial recovery

Latam takes new financing to exit judicial recovery

The airline announced that it had signed an agreement for the issuance of US$ 2.25 billion in debt and an additional US$ 500 million in a credit line.

the airline Latam announced that it has signed a series of financing commitment letters that, according to the airline, guarantee the amount necessary for the its exit from judicial reorganization in the United States (the so-called Chapter 11).

Through the agreements, which still need the approval of the American Justice, the airline will issue a new debt of US$ 2.25 billion and will have a credit line of US$ 500 million.

The company lost US$4.65 billion last year, 2% more than in 2020.

The letters of commitment referring to the US$ 2.25 billion and the US$ 500 million credit line were signed by the Latam group with the banks JPMorgan Chase, National Association, Goldman Sachs, Barclays, Natixis, New York Branch, BNP Paribas and BNP Paribas Securities Corp., according to the airline’s statement.

This financing will be granted as a new DIP (debtor-in-possession) loan, which gives the creditor absolute priority in receiving the claims. Unlike Latam’s current DIP financing, which has the airline’s shareholders as the main financiers, the current one will remain in effect after Latam’s exit from the judicial recovery process.

“Exit funding will automatically be converted into term funding on the exit date from the Chapter 11 process,” Latam said in a note. The airline says that the exit financing will have US$ 500 million in revolving credit and three more loans of US$ 750 million, the last two with issuance of five and seven years.

In a note, the president of the Latam group, Roberto Alvo, states that the resource “secures the entirety of the financing necessary to complete our restructuring plan” for the company with the “flexibility that allows us to optimize existing market conditions”. The US$ 2.25 billion raised now comes after a capital of US$ 5.4 billion in credit that Latam had already obtained in January 2022.

The exit financing also includes a DIP (debtor in possession) loan, called by the company DIP Junior, of US$ 1.172 billion, which must be granted while Latam is in the Chapter 11 process and which needs to be fully paid by the Latam before its exit from judicial reorganization. Latam wants to use this money to pay off the first DIP it received at the beginning of the year. At the time, Latam predicted a capital increase of US$ 5.4 billion.

The priority of this Junior DIP will be lower than that of the exit funding. This contribution will be made by Delta Air Lines, currently a shareholder of Latam, and creditors Lozuy SA, Costa Verde Aeronáutica SA, QA Investments Limited, in addition to other current creditors of Latam represented by Evercore.

Source: O Globo Agency

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