Latam will come out of Chapter 11 in November and with 35% less debt than at the start of the process | Financial Journal

Latam’s landing after the turbulent recent years seems to be soon. The airline announced an important milestone in its process of leaving Chapter 11, since in an essential fact sent to the Commission for the Financial Market (CMF), it delivered the details of the economic conditions of the financing agreed with a group of banks in the process, which allows you to have the funds to pay your debtor-in-possession financing (DIP credit). In this way, they anticipate that during the first week of November the company will be able to complete its passage through the US Bankruptcy Code, which began in May 2020 after the devastating effects of the pandemic on the business.

In this way, the company issued US$ 2,250 million of debt, through three instruments. The first of them corresponds to a credit for US$ 1,100 million with a term of five years, but which can be prepaid at the end of the second year; also a five-year bond for US$ 450 million; and a seven-year bond for US$700 million.

“In a very challenging and dynamic context, we are on track to close all of the financing required under the Company’s Reorganization Plan.”
Roberto Alvo, CEO of Latam.

In addition to the three debt instruments, Latam signed a revolving line of credit for US$500 million that the group is not making use of, but it allows completing the liquidity plan.

It should be remembered that last June the company informed the market that it had signed financing commitment letters with JPMorgan Chase Bank, Goldman Sachs, Barclays Bank, BNP Paribas, and Natixis. It will be these entities that will deliver the aforementioned resources.

“In a very challenging and dynamic context, we are on track to close all of the financing required under the Company’s Reorganization Plan. In the coming weeks we hope to exit the Chapter 11 process with US$2.2 billion of liquidity”, said the CEO of Latam, Roberto Alvo.

In addition, the executive explained that with these operations the company will leave with a debt of approximately 35% versus what it had before entering the process. Latam had close to US$11 billion in financial liabilities before the start of the pandemic and will come out of Chapter 11 with some US$6.5 billion, therefore in the restructuring, liabilities are being reduced by close to US$4 billion.

projections

The airline estimated a passenger operation of 81% for October (measured in available seat kilometers – ASK) compared to the same period in 2019. For the month, five routes will be restarted in South America: Sao Paulo-Boston, Rio de Janeiro -Buenos Aires, Quito-Miami, Lima-Mendoza and Santiago-Puerto Natales.

Latam plans to operate approximately 1,291 daily national and international flights during the month, connecting 144 destinations in 22 countries. The cargo business, meanwhile, has almost 1,400 cargo plane flights scheduled. All these projections are subject to the evolution of the pandemic in the countries where the group operates.

In September 2022, passenger traffic (measured in rental passenger kilometers – RPK) was 82.3% compared to the same period in 2019, based on an operation measured in ASK (available seat kilometers) of 81, 5% compared to September 2019. This implied that the load factor increased 0.8 percentage points, reaching 83.3%.