On Saturday, LATAM Airlines Group announced that the US Bankruptcy Court for the Southern District of New York approved the group’s Plan of Reorganization filed by the company in the context of its Chapter 11 reorganization proceeding.

LATAM’s exiting Chapter 11

After more than two years under a Chapter 11 bankruptcy process, South America’s largest airline, LATAM, has taken one of the final steps towards exiting the proceedings. LATAM’s formal exit from the Chapter 11 process is expected during the second half of this year.

Roberto Alvo, CEO of LATAM Airlines Group, said,

“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.”

The Plan was backed by nearly all of LATAM’s creditors and complies with US and Chilean legal requirements, said the airline in a statement.

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 injection includes a US$5.4 billion of financing backed by major shareholders such as Delta Air Lines and Qatar Airways and LATAM’s major creditors.

LATAM Airlines has become the latest Latin American airline to have its Chapter 11 Plan approved. Avianca emerged from its bankruptcy process late last year and Aeromexico in March 2022.

The three airlines filed for Chapter 11 proceedings between May and June 2020 while facing the worst crisis in aviation history due to the COVID-19 pandemic.

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LATAM’s exit financing secured

Last week, LATAM announced it had signed debt commitment letters with different financial entities, securing an exit financing from its Chapter 11 process; that was a critical step towards getting the approval of the United States Court, led by Judge James L. Garrity.

LATAM signed commitment letters with entities such as JPMorgan Chase Bank, N.A., Goldman Sachs Lending Partners LLC, and Barclays Bank PLC, among others.

The exit finance commitment letters will provide a new debt of US$2.25 billion and a new credit facility of US$500 million, plus US$1.17 billion in debtor-in-possession (DIP) financing.

What’s next for LATAM?

The South American airline will now move on to a phase where it has to execute the Plan of Reorganization approved today.

The airline explained,

“LATAM is now focused on the implementation of the corporate actions necessary to complete the exit from the Chapter 11 reorganization process in the coming months. 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, and the implementation of the respective preferential offering periods of the convertible shares and bonds in favor of LATAM’s current shareholders.

According to the airline's latest data, LATAM is currently operating at around 74% of its pre-pandemic capacity levels.

The company, which has branches in Chile, Brazil, Ecuador, Peru, and Colombia, operates around 1,123 daily domestic and international flights during June, connecting 133 destinations in 21 countries.

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