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LATAM Airlines Brazil Files for Chapter 11 Bankruptcy, Group Formalizes Additional DIP Financing

LATAM Airlines Group S.A. announced on Thursday that LATAM Airlines Brazil has filed for Chapter 11 bankruptcy, a voluntary reorganization. The company also announced the formalization of their second tranche of DIP (debtor-in-possession) financing.

LATAM Airlines Airbus A320neo - Courtesy Airbus

On Thursday (July 9, 2020), the LATAM Airlines Group announced the Chapter 11 Bankruptcy filing of its LATAM Airlines Brazil subsidiary. The voluntary reorganization filed in the U.S. will allow the carrier to continue operations while restructuring debt and realigning their fleet. LATAM’s subsidiaries in Chile, Peru, Columbia and Peru are already part of a previous Chapter 11 Bankruptcy filed on May 26, 2020 and the Group’s subsidiary in Argentina recently ceased operations. LATAM Airlines Brazil will continue to operate passenger and cargo flights as normal and pending court authorization will continue to fulfill commitments to customers, frequent flyer program and team members.

LATAM Airlines Group also announced today the formalization of the second tranche of their debtor-in-possession (DIP) financing. The second tranche of DIP funds (Tranche A) totals US$1.3 billion and has been committed by Oaktree Capital Management L.P. and affiliates. The proposal still needs to be reviewed and approved by the Court of the Southern District of New York. The first tranche (Tranche C) was compromised of US$900 million committed by shareholders of Qatar Airways, and the Cueto and Amaro families when LATAM and some of its affiliates filed for bankruptcy last May. In Thursday’s announcement, LATAM Airlines Group’s CEO, Roberto Alvo said,

“Today, LATAM has taken a significant step in ensuring its operational continuity by securing the commitment of Oaktree Capital Management and its affiliates for the total financing of Tranche A. We hope that, together with Tranche C, it will be approved by the court in the coming weeks. The support of our two principal shareholders has been essential, sparking an interest and commitment from investors that we did not have a month ago. This show of confidence in the group’s future has enabled us to secure all the resources that are required to continue operating during the crisis and as demand recovers, to successfully complete the Chapter 11 process.”

LATAM believes that the combination of both DIP financing tranches will be enough for the Group to weather the COVID-19 crisis and hopes that government financial support won’t be necessary. However, LATAM Airlines Brazil will continue to negotiate with Brazil’s National Bank for Economic and Social Development (BNDES) for potential future support.

Source: LATAM Airlines Group S.A.


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