RIO DE JANEIRO, BRAZIL – The LATAM Group has for the 4th time asked the Court of the Southern District of New York for more time to present its restructuring plan to creditors.
The new request is for the submission to be made by October 15, with a limit for approval until December 15, 2021. “The requested extensions will promote the development of a restructuring plan that satisfies LATAM’s exit capital and financing needs and assists in negotiations with the several Chapter 11 stakeholders,” the company said in a statement.
LATAM Brasil’s CEO Jerome Cadier pointed out last week that there was room for the group to extend the exclusivity period again until October at the latest, but at the time the group had not decided whether it would follow suit.
However, international media reports indicated that Azul considered buying the whole operation or establishing a joint venture with the Chilean company.
LATAM is denying any interest in this direction – although it has assessed the issue in the past, when it signed a flight-sharing agreement with Azul in Brazil, which was recently terminated.
The group on Thursday, September 9, announced that given the favorable market conditions, it is requesting statements of interest from potential lenders for a line of credit under Tranche B to help build the financing in the DIP (debtor in possession) model. The company added in the statement that it “will consider proposals to determine whether it can access funds at a more competitive rate than the existing Tranche A and Tranche C credit lines.”
On July 31, 2021, LATAM reported liquidity of approximately US$1.9 billion, which considers US$1.1 billion in cash and US$800 million in undrawn DIP financing.
According to the company, LATAM’s existing DIP financing provides for a possible additional third tranche (Tranche B) of secured financing of up to US$750 million, in addition to the existing lines of US$1.3 billion in Tranche A and US$1.15 billion in Tranche C, funds which have not been fully withdrawn to date.
The company also disclosed its business plan for the next 5 years. According to the airline, the goal is to recover profitability by 2024, sustained by the resumption of demand. According to the group, the estimate is to be able to recover supply levels (measured in ASK) in 2024 compared to the levels recorded in 2019.
The group said in a statement that the recovery is supported by the operational increase in the domestic market of LATAM Brasil so far, which reached the capacity (measured in ASK) of 77% in August, compared to 2019. The estimate is that the operation in Brazil should surpass 100% over 2019 by early 2022.
Also according to the company, the domestic market of affiliates in Colombia, Ecuador, Peru and Chile has reached 72% in August, while the group’s international recovery, both short flights in the region and long haul, continues to be impacted by travel restrictions.
The company said the group’s total revenue is expected to increase 13% by 2026, while passenger and cargo revenues are expected to grow 8% and 59%, respectively. LATAM projects an operating margin (EBIT) of 11.2% in 2026, the highest since 2010.
“Despite the dramatic crisis we have faced, we have made the most of our restructuring, not only by becoming substantially more efficient, but also by consolidating a better value proposition for customers, which has been reinforced by the great interest we have received in providing exit financing,” said LATAM Airlines CEO Roberto Alvo in a statement.
The company said it has so far received several offers from its major creditors and majority shareholders, each supplying over US$5 billion in new funds. It will be up to the company to choose the best proposal.