LATAM Airlines Group has shared new details regarding its Chapter 11 Plan of Reorganization and financing. The South American giant expects to raise US$8.19 billion in new money from new convertible notes, as well as issuing new common stock, representing approximately US$800 million.

Plus, LATAM’s Plan of Reorganization contemplates the support of a group of unsecured creditors (represented by Evercore), Delta Air Lines, Qatar Airways, the Cueto Group, and the Eblen Group. Let’s investigate further.

LATAM’s financing to the detail

LATAM Airlines Group published its Plan of Reorganization and financing on November 26, 2021. In this plan, the airline disclosed how it would look financially once it emerges from the Chapter 11 proceedings in the United States. LATAM expects to successfully close its bankruptcy process in 2022.

The Plan of Reorganization contemplates, among other things, the issuance of new common stock, representing approximately US$800 million. This stock will be offered to all of the airline’s shareholders.

Today, LATAM outlined that Delta, Qatar, the Cueto Group, and the Eblen Group have agreed to backstop up to US$400 million of new common stock. They will not be entitled to any payment as a result of such commitment, said LATAM in a statement sent to the Chilean Comisión para el Mercado Financiero.

Meanwhile, the Evercore unsecured creditors have agreed to backstop the remaining US$400 million. In exchange, they will receive a payment of 20% calculated over such an amount.

Additionally, LATAM proposed the infusion of US$8.19 billion into the group. This amount will be issued through new convertible notes, known as Class A, Class B, and Class C.

The New Convertible Notes Class B will raise approximately US$1.37 billion, while Class C notes will raise about US$6.81 billion.

Delta, Qatar Airways, the Cueto Group, and the Eblen Group will fully backstop the Class B notes. Meanwhile, the Evercore creditors will backstop US$3.2 billion of the Class C notes in exchange for a payment of 20%.

Unsecured and Chilean creditors are not happy

LATAM’s financing plan is not making everyone happy. According to a report by Bloomberg, some Chilean creditors are angry because the current plan would leave them with crumbles. For instance, it is likely that foreign creditors will receive 100 cents for each dollar once LATAM’s Chapter 11 ends, meanwhile, domestic creditors will only receive 20 cents.

Therefore, it is expected that some creditors will object to LATAM’s Chapter 11 plan, similar to what happened in Aeromexico and Avianca’s processes. Nonetheless, both Aeromexico and Avianca have gone through. Avianca exited Chapter 11 late last year, while Aeromexico has received major creditor support via voting. The Mexican carrier will have a hearing to approve its Chapter 11 plan later this month.

LATAM’s strong domestic recovery

In January 2022, LATAM Airlines Group projects its operational passenger projection to reach up to 72% of January 2019 levels. However, this estimate could be impacted due to the increase in cases of the Omicron variants of COVID-19.

LATAM plans to operate approximately 1,245 daily domestic and international flights during January. The airline will connect 132 destinations in 18 countries. Meanwhile, the cargo business will have 1,190 flights scheduled on cargo freighters, with an 85 increase compared to 2019.

LATAM’s passenger traffic in December 2021 was 68.8% compared to 2019 levels.

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