Following competitor Avianca’s successful financial restructuring process and emergence from Chapter 11 on 01DEC21, becoming a more efficient and financially stronger airline, the LATAM Airlines Group embarks on a similar journey. In an urgent statement issued today (19JUN22) the management announced that the U.S. Bankruptcy Court for the Southern District of New York approved the group's Plan of Reorganization filed by LATAM on 26MAY20 in the context of its Chapter 11 reorganization proceeding.
It can be assumed that the door opener for the U.S. judge’s decision was LATAM’s recent signing of a Declaration of Commitment in favor of various financial institutions worth over 500 million
dollars. Thanks to the assurance, the heaviest financial and legal roadblocks have been cleared out of the way.
Negotiations have paid off
The endorsement includes the Santiago, Chile-based parent company and its subsidiaries in Brazil, Colombia, Ecuador, Peru and the U.S. Backed by nearly all of LATAM's creditors, the Restructuring Plan is the result of months of negotiations among major stakeholders, which included an extensive mediation period, emphasizes its management.
The Plan complies with U.S. and Chilean legal requirements. The confirmation order issued by the U.S. Court represents the latest milestone in the U.S. Chapter 11 process initiated by LATAM to ensure its long-term sustainability, reads a release.
“We are very satisfied with the judge's confirmation of our restructuring plan. This is a very important step in the process to emerge from Chapter 11, and we will continue working hard to complete the remaining steps in the coming months,” Roberto Alvo, CEO of LATAM Airlines Group S.A. commented on the U.S. Court’s decision.
Next, the airline will focus on the implementation of the corporate actions necessary to complete the exit from the Chapter 11 reorganization process. This includes approval at the Extraordinary Shareholders' Meeting of the new capital structure contemplated in the Plan, the registration of shares and bonds in the securities registry of the Financial Market Commission (CMF) and the implementation of the respective preferential offering periods of the convertible shares and bonds in favour of LATAM's current shareholders.
New financial foundations
Once effective, the LATAM Plan will inject approximately US$8 billion through a combination of a capital increase, the issuance of convertible bonds and new debt. This includes US$5.4 billion of financing backed by major shareholders (Delta Air Lines, Qatar Airways and Grupo Cueto) and LATAM's major creditors (i.e., the Parent Ad Hoc Group creditors and certain local bondholders). LATAM's exit from the Chapter 11 process is expected to happen soon, either in Q3 or Q4 - latest.
Cargo keeps earning money, pax still doesn’t
In its latest quarterly financial statement, the carrier posted US$1,959 million operating revenues in Q1, 2022, still 22,4% below 2019 levels, but a remarkable 114.5% increase compared to Q1, 2021. Pax revenues (-31.4%) still trailed 2019 pre Covid levels due to reduced operations and lasting Covid-19 (Omicron) impacts. In contrast, cargo revenues increased 24.8% in Q1, 2022, versus Q1, 2021.
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