The company will enter those funds through a combination of a capital increase, convertible bonds and debt.
The airline Latam presented a restructuring plan to a New York court on Friday in which it proposes the injection of 8.19 billion dollars to the group to get out of Chapter 11 of the United States Bankruptcy Law, to which the company filed for the last year hit by the pandemic.
The company will enter these funds through a combination of a capital increase, convertible bonds and debt, as detailed in a statement released in the early hours of this Saturday, after presenting the plan in the time limit set by the Court, which expired. this Friday, November 26.
With this capital injection, Latam and its subsidiaries in Brazil, Chile, Colombia, Ecuador, Peru and the United States hope to exit Chapter 11 with the appropriate capitalization to execute their business plan and ensure its long-term sustainability.
After exiting the process, the airline aims to have a total debt of approximately 7,260 million dollars and a liquidity of approximately 2,670 million dollars.
The group determined that this is a conservative level of indebtedness and adequate liquidity in a period of continued uncertainty for global aviation, and that it will leave a better position for future operations.
The hearing to determine whether the company can proceed with the plan is expected to be held in January 2022. If approved, the process would begin until a new hearing, which Latam requested to be held in March 2022, the Court evaluate the execution plan.
“We are facing the greatest crisis in the aviation sector, in which the industry was practically paralyzed. Although our process has not yet finished, we have reached a fundamental milestone on the way to a more solid financial future,” said the CEO of Latam, Roberto Alvo, according to the statement.
The detail of the plan
Latam intends to launch an offering of $ 800 million in pre-emptive rights through the issuance of common shares, which will be opened to all shareholders of the company in accordance with their pre-emptive rights.
It will also issue three different classes of convertible bonds, which will be offered preferentially to Latam shareholders. Two classes of these bonds will be awarded in consideration of a new contribution of money for a total amount of $ 4.64 billion.
Finally, Latam will obtain 500 million dollars in a new committed credit facility known as the Revolving Credit Facility (RCF) and approximately 2,250 million dollars in financing through new debt resources, either through a new term loan or new bonds. .
The group also intends to use the Chapter 11 process to refinance or modify pre-process leases, the RCF committed line of credit, and the replacement engine line.
After the economic blow that the pandemic hit, Latam – which is listed on the New York Stock Exchange and the Santiago Stock Exchange – voluntarily accepted the United States Bankruptcy law in May 2020, a judicial formula that allows a company that cannot pay its debts restructures without pressure from creditors.
Before the pandemic, Latam flew to 145 destinations in 26 countries and operated approximately 1,400 daily flights, transporting more than 74 million passengers annually.
With the pandemic, the company, born in 2012 from the merger between the Chilean Lan and the Brazilian Tam, reduced its operation by up to 95% and ended 2020 with a drop in its operating income of 58.4%.
During the third quarter of this year, it registered a net loss of 691.9 million dollars and income of 1,314 million dollars, which represents 50.7% less than what was achieved in the same period of 2019, before the health emergency.
The revenue data, however, represents an improvement of 47.8% compared to the second quarter of 2021 and 156.1% compared to 2020, the year the company ended with a net loss of 4,545.9 million dollars.
Last September, within the framework of its negotiations with bondholders and creditors, the company projected the recovery of its profitability to levels prior to the health emergency for 2024, with an increase in operating income of 78%. (I)
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