LATAM Airlines Brazil has joined other parts of the airline group in entering Chapter 11 bankruptcy protection as it took a further step to securing required financing to complete its restructuring.
LATAM Airlines Group has today unveiled a key funding commitment from Oaktree Capital Management and its affiliates, covering a second tranche of financing for its restructuring.
South American operator LATAM Airlines Group and its affiliates in Chile, Peru, Colombia, Ecuador and the USA filed for US Chapter 11 creditor protection on 26 May. But the Brazilian unit was not among those included in the original filing.
”LATAM Airlines Brazil today began a voluntary reorganisation process as part of Chapter 11 protection in the USA to restructure its debt and effectively manage its aircraft fleet, while enabling operational continuity,” the company says in an update today.
”LATAM Airlines Brazil’s decision is a natural step in light of the continuing Covid-19 pandemic and offers the best option to access the proposed debtor-in-possession financing that will provide the tools to adapt to this new reality.”
The Brazilian unit will continue to operate flights normally during the process.
LATAM Airlines Group has now presented the second tranche of its debtor-in-possession financing proposal for approval to a New York court. The tranche covers $1.3 billion that was committed by Oaktree Capital Management and its affiliates.
An earlier tranche comprising $900 million was committed by shareholders Qatar Airways and the Cueto and Amaro families when LATAM made its original Chapter 11 restructuring filing.
”Combined, Tranches A and C meet LATAM’s financing requirements in the context of the Covid-19 crisis and, as a result, it is hoped that financial support will not be required from governments,” the company says. ”Nonetheless, LATAM Airlines Brazil will continue advancing negotiations with Brazil’s National Bank for Economic and Social Development (BNDES).”
LATAM Airlines Group chief executive Roberto Alvo says: “Today, LATAM has taken a significant step in ensuring its operational continuity by securing the commitment of Oaktree Capital Management and its affiliates for the total financing of Tranche A. We hope that, together with Tranche C, it will be approved by the court in the coming weeks.
”The support of two of our principal shareholders has been essential, sparking an interest and commitment from investors that we did not have a month ago. This show of confidence in the group’s future has enabled us to secure all the resources that are required to continue operating during the crisis and as demand recovers, to successfully complete the Chapter 11 process.”
