LATAM Airlines Group said on Friday it had filed a reorganization plan, proposing a US$8.2 billion injection of capital in a bid to exit its Chapter 11 bankruptcy process, and at the same time announced it had rejected the Brazilian airline Azul acquisition proposal as “incomplete” and “insufficient”.
The financial proposal includes a mix of new equity, convertible notes and debt, LATAM Group said, adding that it intends to launch US$ 800 million equity rights offering to shareholders, once it has a confirmation of the plan.
While our process is not yet over, we have reached a critical milestone in the path to a stronger financial future, said Roberto Alvo, CEO of the largest airline in Latin America.
LATAM admitted it had received several offers to fund the exit from Chapter 11 bankruptcy, each of which is worth more than US$ 5 billion. The group filed for Chapter 11 bankruptcy protection in New York in May 2020 as world travel came to a halt amid the COVID-19 pandemic.
The Santiago based company said that on emerging from Chapter 11, it expects to have debts of about US$ 7.26bn and liquidity of some US$ 2,67bn. The restructuring plan is accompanied by a support agreement with creditor group Parent Ad Hoc Group and some LATAM shareholders.
CEO Alvo explained that we discarded the Azul initiative since it was not possible to proceed on that proposal, and its content remains confidential.
The reorganization program will be assessed by the US bankruptcy court next January 27. Following this, the group will have a period to have the program approved by its creditors.
CEO Alvo anticipated that the reorganization program has the support of 71% of creditors, and under Chapter 11 rules it needs the approval of 66%.
However and according to Brazilian media, Azul airline has not given up, and is holding a round of talks with creditors working on an alternative plan that would give it control over Latam. This could be the case if creditors finally reject Latam's proposal. Under the Chilean group plan, shareholders can have access to the purchase of US$ 800 million equity rights, convertible notes plus other financial instruments to certain creditors. The package must add to some US$ 4,64bn.
Latam reported losses of some US$ 692 million in the third quarter.