New York judge approves new financing of US $ 750 million for Latam Airlines

A judge of New York has given the green light to the new financing line of US $ 750 million requested by the Chilean airline Latam, the largest in Latin America, as part of its exit plan from Chapter 11 of the Bankruptcy Law of USA, to which the company took refuge last year due to the crisis derived from the pandemic.

Judge James Garrity considered in a letter published last night that the company offered a “good and sufficient” reason for the application of this line of credit, called Tranche B of the DIP financing (debtor in possession).

The judicial document states that these US $ 750 million are necessary, among other things, to “allow the orderly continuity of their businesses”, “maintain business relationships with vendors, suppliers, carriers and customers” or “pay wages.”

The text insists that the ability of the “debtors” (Latam) to continue obtaining “sufficient working capital and liquidity” through new loans on “favorable terms, is vital for the preservation and maintenance” of the company and for its successful reorganization.

As stated in a statement by the group’s Vice President of Finance, Ramiro Alfonsín, on September 29, the proposal “will allow access to better financing conditions, generating significant cost savings and benefiting our creditors.”

The resources were obtained in the credit line under Tranche B of DIP financing “at rates and conditions more competitive than those obtained for Tranches A and C, which will allow you to improve your financing cost under Chapter 11”, explained the firm.

Latam’s board of directors unanimously approved the offer of a group made up of Oaktree Capital Management, Apollo Management Holdings “and certain funds, accounts and entities advised by them,” he said.

The DIP financing would thus be made up of the existing lines of US $ 1,300 million from Tranche A and US $ 1,150 million from Tranche C, and to date US $ 1,650 million have already been drawn from Tranches A and C, Latam added.

In May 2020 and voluntarily, the group filed for Chapter 11 of the United States Bankruptcy Law, a formula that allows a company that cannot pay its debts to restructure without pressure from creditors.

The decision included both the parent company – which is listed on the New York Stock Exchange and the Santiago Stock Exchange – as well as its subsidiaries in Chile, Peru, Colombia, Ecuador and the United States.

Last week, Latam asked the New York Court that is handling its case to extend until November 26 the deadline to present its reorganization plan, which expired last Friday and had previously been postponed in September.

Judge Garrity is expected to rule on this request in the session scheduled for October 28.

Likewise, on the 14th Latam announced that it has obtained a non-binding financing proposal for US $ 12,000 million within the framework of its restructuring plan, which has been presented by a group of ad-hoc creditors represented by Moelis & Company and White & Case LLP.