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LATAM Airlines Secures Financing and Expects to Exit Chapter 11 by Early November

LATAM Airlines Group informed through an Essential Fact filed with the Chilean Financial Market Commission (CMF) that, together with Professional Airline Services Inc. (a wholly owned subsidiary of LATAM), it priced an offering of US$450 million aggregate principal amount of senior secured notes due 2027 and US$700,000,000 aggregate principal amount of senior secured notes due 2029.

In addition, the Company priced a US$1.1 billion Term Financing with an interest rate at LATAM’s choice of ABR + 8.50% or Adjusted Term SOFR + 9.50% (after Chapter 11 exit – and prior to the effective date, ABR + 8.75% or Adjusted Term SOFR + 9.75%).

This represents an important milestone for the Company, and one of the latest in its Chapter 11 process. With these new funds, LATAM will have obtained the necessary financing to repay its existing debtor-in-possession financing currently contemplated to emerge from Chapter 11 of the U.S. Bankruptcy Code (“Chapter 11”) during the first week of November.

The Company has also obtained a new revolving credit facility (“RCF”) in the amount of approximately US$500 million.

“In a very challenging and dynamic context, we are on track to close the entire financing required under the Company’s Plan of Reorganization. In the coming weeks we expect to emerge from the Chapter 11 process with US$2.2 billion of liquidity and a debt reduction of approximately 35% versus what we had before entering this process,” said LATAM CEO Roberto Alvo.

Last June, the Company informed the CMF of the Chapter 11 exit financing structure, which contemplated the incurrence of new debt of up to US$2.25 billion, including the Bonds and a Term Financing, in addition to a new US$500 million revolving credit facility (the “DTE Financing”). The Notes were originally structured as Bridge Loans for an aggregate amount of US$1.5 billion committed by various banks.

On September, LATAM presented an updated business plan, which reported an improvement in its cost structure. The group updated its cost savings estimate from US$900 million to more than US$1 billion annually. At the same time, the group implemented structural transformations:  among others, it is renegotiating its fleet, improving its relative costs, strengthening its network, and reducing its debt by approximately 36% compared to pre-pandemic levels.

Also, the plan foresees that by the end of 2022 demand in the subsidiaries’ domestic markets will have recovered to 2019 levels. In relation to international traffic, LATAM estimates that the recovery will be slower, reaching 2019 levels by mid-2023. The airline notes that its international operations accounted for approximately 45% of 2019 revenues. Finally, regarding income, the plan aims for the group to surpass 2019 levels only in 2024, when it estimates profits close to US$11.5 billion.


This story has been published -in Spanish- by Aviacionline.


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