LATAM Obtains Up To $750 Million In New Funds

Today, LATAM Airlines Group announced that it obtained committed financing of up to US$750 million as part of its Chapter 11 proceedings. This amount would allow the company to improve its financing conditions, as LATAM is getting ready to exit its bankruptcy process. Let’s investigate further.

LATAM obtains up to US$750 million in new funds. Photo: Vincenzo Pace | Simple Flying

How much money has LATAM received so far?

LATAM Airlines Group has been in a Chapter 11 bankruptcy since May 2020 due to the impact of the COVID-19 pandemic. Currently, the airline is working towards presenting its Reorganization Plan and exit successfully from Chapter 11.

In the past few months, LATAM received Debtor In Possession financing (DIP) of US$2.4 billion. It was composed of Tranche A, which comprises up to US$1.3 billion of committed funds, and Tranche C, with up to US$1.15 billion. To date, the airline has withdrawn US$1.65 billion from both tranches.

Nevertheless, LATAM has remained open to receiving new offers from investors, and now, the airline could get new financing. A group of financiers composed of Oaktree Capital Management, Apollo Management Holdings, among others, presented a new DIP financing of up to US$750 million.

Ramiro Alfonsín, LATAM Airlines Group CFO, said,

“We received several offers from investors who have expressed their interest in supporting us in our Chapter 11 process. This proposal will allow us access to better financing conditions, generating significant cost savings and benefiting our creditors and LATAM.”

LATAM has support from major stakeholders. Photo: Vincenzo Pace | Simple Flying

What’s LATAM’s current status in its Chapter 11?

The US Court still has to approve the incorporation of the committed funds from Tranche B of the DIP financing. The airline said that it could receive additional proposals to grant financing under Tranche B.

Last week, the Court that oversees LATAM’s Chapter 11 approved the request to extend the exclusivity period to present LATAM’s Reorganization Plan. The company now has until October 15 to submit the Plan and one more month for the creditors to vote.

In the last few months, LATAM has received over US$5 billion in financing offers to exit bankruptcy. Most of these offers have been made by significant claim holders and majority shareholders like Delta Air Lines and Qatar Airways.

Additionally, LATAM has released its five-year projections following the bankruptcy program. The airline forecasts a return to pre-pandemic capacity by 2024 and a 7% growth by 2026.

Moreover, LATAM expects to return to profitability by 2024. Total revenues would increase 13% by 2026, with passenger revenues growing 8% and cargo rising 59% compared to 2019 levels.

LATAM expects to return to profitability by 2024. Photo: Vincenzo Pace | Simple Flying

How’s LATAM operating at the moment?

LATAM plans to return to its pre-pandemic capacity by 2024. Despite that, the airline is currently operating at approximately 53% capacity compared to its pre-pandemic numbers.

During September, LATAM operated approximately 970 domestic and international daily flights. It connected with 117 destinations in 16 countries, including several in Europe.

LATAM Cargo scheduled 990 flights using its freighter fleet. The cargo division has been one of LATAM’s highlights during the pandemic.

If we analyze LATAM’s results, Colombia is performing the best. In that country, LATAM is currently operating at an 80% pre-pandemic capacity, thanks to the strong rebound of the domestic market.

Meanwhile, LATAM Brasil is currently operating at 55% of its pre-pandemic capacity; LATAM Chile is at 50%; LATAM Peru is at 51%; and LATAM Ecuador is at 31%.

What do you think of LATAM’s latest financing proposal? Let us know in the comments.