A LATAM Brasil A319. (Photo: Rafael Luiz Canossa (A319 LATAM SBPA) [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons)
As the New York Times published on Thursday, LATAM Airlines Group, announced it will be adding its unit in Brazil to the debt restructuring process. The company said the proposal still required approval from the U.S. Court. LATAM also announced it would add its unit in Brazil to the bankruptcy protection process in the United States, calling the move a “natural step in light of the continuing COVID-19 pandemic”.
According to Latin Finance, LATAM Airlines Group alleged it has since incorporated its Brazilian affiliate into the Chapter 11 agreement in what it described as “a natural step” in light of the continuing COVID-19 pandemic and one that will “facilitate access to proposed DIP (Debtor-In-Possession) financing.”
As Reuters updated last May, LATAM Airlines Group filed for U.S. bankruptcy protection aiming to reorder $18 billion in debt. It was the world’s largest airline to date to seek an emergency reorganization due to the coronavirus pandemic.
As announced, the requested restructuring filed in May, involved subsidiaries in Chile, Colombia, Peru, Ecuador, the United States of America, the Cayman Islands and the Netherlands. The subsidiaries of Argentina, Brazil, and Paraguay were not included in this procedure. Then, in June, LATAM Airlines Group announced it is closing LATAM Airlines Argentina. After these announcements, the only one LATAM branch that is not under Chapter 11 protection and has not been closed is LATAM Airlines Paraguay.
Despite all these bankruptcy measures, the Brazilian subsidiary will continue operating passengers and cargo flights normally as the other branches involved in the bankruptcy issue continued operations.
Latam Airlines Group made public a press release, in which it explained that it presented the second tranche (Tranche A) of its DIP (debtor-in-possession) financing proposal to the Court of the Southern District of New York, as part of the Chapter 11 process. Until now the two tranches amount to $2.2 billion, the Tranche C comprises $900 million committed by its shareholders Qatar Airways, the Cueto and Amaro families; and the Tranche A comprises $1.3 billion committed by Oaktree Capital Management LP.
Combined, these tranches 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. Nonetheless, LATAM Airlines Brazil will continue advancing negotiations with Brazil’s National Bank for Economic and Social Development (BNDES).
LATAM Airlines Group CEO, Roberto Alvo, declared that “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 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,” he finished.
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