Latam Airlines reveals its creditors’ offer to get out of bankruptcy in the US

Public holiday in Santiago, not so in New York, where the international markets continued to operate on Monday. And business. Latam Airlines, a Chilean company that has been under the United States Bankruptcy Law since May 2020, communicated to the markets one of the offers received in the framework of the reorganization of its finances and businesses: the one presented by the fund manager Moelis & Company and that he represents a group of ad hoc creditors of the airline.

“The proposal was presented by an ad-hoc group of creditors represented by Moelis & Company and White & Case LLP, which was made public after the end of the confidentiality period agreed between LATAM and the bidders,” reported Latam Airlines through a public statement and an essential fact sent to the Commission for the Financial Market (CMF). White & Case is the law firm that represents this group of creditors.

The documentation released this Monday by Latam reveals that Moelis estimated an enterprise value of US $ 12,500 million for the Chilean airline. The so-called enterprise value allows estimating the cash flows and the debt and capital structure that the company will require upon leaving Chapter 11.

The plan presented by Moelis also implied a share reorganization that includes a capital increase of close to US $ 3,500 million, with a price 5% lower than the Equity Value Plan. In addition, the issuance of new debt via bond issuance for US $ 2,250 million and a new financing line for US $ 750 million.

Latam clarified that Moelis’s is one of the non-binding financing proposals received in the framework of the negotiation of its reorganization and financing plan to exit its reorganization procedure under Chapter 11 of the United States Bankruptcy Code.

And although he did not reveal what the other competing proposals are, sources linked to the multiple negotiation said that there are basically two others, as published by Pulse this Sunday. The first is made up of shareholders: the Cueto family, Qatar and Delta, an alliance that today has just over 50% of the shares and does not want to lose positions in the airline. The other is Sixth Street Partners, a global firm with $ 50 billion in assets under management that has bought airline debt. Unlike Moelis, Sixth Street would have support from a larger group of Latam creditors, so its chances of success would be greater, people familiar with the negotiations said.

“Currently Latam has the exclusive right to present its reorganization plan until October 15, 2021, and the exclusive right to request its acceptance until December 15, 2021,” the company indicated. However, he affirmed that if necessary, he could request a new extension of said periods of exclusivity, “which will be timely requested to the court and informed to the regulatory authority and the market.”

Among the negotiators they believe that the company will probably decide this Thursday whether or not to resort to a new extension, depending on the progress of the negotiations with all interested parties.

The company had communicated a month ago, on September 9, that it had received “certain non-binding financing proposals through equity and debt”, which contemplated new funds for more than US $ 5,000 million. Latam had presented to a group of international investors “an indicative structure proposal for its reorganization, which sought approximately US $ 5 billion in financing.”

The company indicated in the essential fact that “Latam continues to discuss with its main creditors and majority shareholders regarding the Exit Proposals, and continues to focus on ensuring that any exit strategy allows it to emerge from the Chapter 11 Procedure with a robust capital structure, with adequate liquidity, with the ability to successfully execute its business plan in a sustainable manner over time and in compliance with all applicable laws ”.

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