US court approves Latam restructuring plan

US court approves Latam restructuring plan

The Chilean-Brazilian airline Latam had its restructuring plan to definitively exit the judicial reorganization approved by the American Court.

“We are very pleased with the confirmation of our restructuring plan by the judge. This is a very important step in the process to exit Chapter 11 (of the American judicial reorganization law) and we will continue to work hard to complete the remaining steps in the coming months”, said the airline’s CEO, Roberto Alvo, in a note.

“This includes the $5.4 billion of financing backed by major shareholders (Delta Air Lines, Qatar Airways and Grupo Cueto) and major Latam creditors,” the company explained in the statement.

In this way, Latam plans to exit bankruptcy proceedings in the United States in the second half of 2022.

The capital financing needed to fulfill the reorganization plan comes from a capital increase, issuance of convertible bonds and new debt, detailed the airline.

Last Monday, the 13th, the airline announced the signing of a series of financing commitment letters that would ensure the amount necessary for its exit from judicial reorganization in the United States. Latam said it would issue a new debt of US$ 2.25 billion and have a credit line of US$ 500 million.

Latam has subsidiaries in Brazil, Chile, Colombia, Ecuador, Peru and the United States.

In May 2020, months after global health restrictions due to the expansion of the coronavirus pandemic, the airline filed for bankruptcy in the US after almost completely suspending its activities.

In November 2021, Latam allocated more than US$ 8 billion to deal with declared debts benefiting from Chapter 11 of the US Bankruptcy Law (which corresponds to the Brazilian tax recovery law), which allows a company that is not in able to pay its debts is restructured without pressure from creditors.

The company — created in 2012, after the merger of Chilean LAN and Brazilian TAM — operated 1,400 daily flights to 145 destinations in 26 countries before the pandemic. In May 2020 its operation was reduced by more than 95%.

The airline then laid off around 12,600 workers, keeping around 30,000 and in June 2020 announced the closure of its subsidiary in Argentina after 15 years of operations.

In March 2022, during the presentation of its 2021 annual results, LATAM announced that its operations “reached 63.5% of 2019 levels during the (fourth) quarter” of last year.

The company also announced a 51% revenue drop in 2021 compared to 2019, the last year before the pandemic hit the aviation sector. The company’s total revenue last year reached $5 billion.

Source: O Globo Agency

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