LATAM obtains millionaire’s worth of exit financing from bankruptcy proceedings
LATAM Group informed this Sunday that after an exhaustive process of searching for the best available conditions for its Chapter 11 exit financing, it has signed financing commitment letters with different financial institutions, which represents a sign of market confidence in LATAM and allows the group to take another step towards its exit from bankruptcy during the second half of 2022, with a more solid financial structure.
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This exit financing is part of the restructuring contemplated in the Reorganization Plan and considers new debt for US$2.25 billion and a new committed credit line for US$500 million and is subject to the approval of the U.S. Court. The financial institutions with which the exit financing commitment letters were signed are: JPMorgan Chase Bank, N.A., Goldman Sachs Lending Partners LLC, Barclays Bank PLC, BNP Paribas, BNP Paribas Securities Corp. and Natixis, New York Branch.
“This commitment secures us the full amount of financing required to complete our restructuring plan and, very importantly, with a degree of flexibility that allows us to optimize existing market conditions. The US$2.25 billion of debt is in addition to the US$5.4 billion of equity we secured in January of this year. This is another important step towards exiting Chapter 11 as a strengthened airline group,” said LATAM Airlines CEO Roberto Alvo.
The exit financing commitment letters also provide for a US$1.172 billion financing to be provided during the life of the Chapter 11 process (i.e., prior to exit) in the form of a debtor-in-possession (DIP) financing with a lower preference for repayment than the exit financing (“Junior DIP Financing”). The financial institutions with which the commitment letter for the Junior DIP Financing was entered into are: Delta Air Lines, Inc, Lozuy S.A., Costa Verde Aeronáutica S.A., QA Investments Limited, and members of LATAM’s ad hoc group of creditors represented by Evercore.
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The Exit Financing has been structured as a debtor-in-possession (DIP) financing to be provided during the Chapter 11 process. Notwithstanding the foregoing, and unlike the DIP Financing currently in place (the “Existing DIP Financing”), it has been structured so that, subject to the satisfaction of certain conditions customary in this type of transaction, it will remain in place after LATAM’s emergence from the Chapter 11 process. Accordingly, to the extent such conditions are met, on the date of exit from the Chapter 11 process, the Exit Financing will automatically convert into a financing that will remain in place thereafter. The foregoing does not apply with respect to 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 over the life of the Chapter 11 process.
The exit financing is structured as follows:
- US$500 million, by way of a revolving credit facility (Exit Revolving Facility), which will accrue interest, at LATAM’s option, alternatively at: (i) ABR plus an applicable margin of 3%; or (ii) Adjusted Term SOFR plus an applicable margin of 4%.
- US$750 million for a term loan facility (Term B Loan Facility), which will accrue interest, at LATAM’s option, alternatively at: (i) ABR plus an applicable margin to be determined at the time of contracting; or (ii) Adjusted Term SOFR plus an applicable margin to be determined at the time of contracting.
- US$750 million, for a 5-year bond bridge loan.
- US$750 million for a 7-year bond bridge loan.
The interest rate under the bridge loans indicated above will be determined based on current market conditions available at the time of closing, subject in all cases to certain limits set forth in the financing commitment letters.
On the other hand, LATAM is awaiting the ruling of the U.S. Court with respect to its Reorganization Plan, which has the substantial support of creditors representing close to 90% of the parent company’s unsecured claims. This after reaching an agreement with bondholders issued in Chile (including those represented by BancoEstado), the Official Committee of Valuation Creditors (UCC), the Ad Hoc group of LATAM’s valuation creditors (led by Sixth Street, Strategic Value Partners and Sculptor Capital) and the main shareholders of the group (Delta Air Lines, Qatar Airways, Grupo Cueto).
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