LATAM Airlines Group has signed its first sustainability-linked loan, totalling $300 million, making it the first airline in South America to carry out a transaction of this this nature.
The agreement signed with Credit Agricole and BNP Paribas corresponds to a revolving credit line that allows LATAM to access additional long-term financing under special conditions in its interest rates if a series of sustainability goals are met.
"This is our first financial product associated with sustainability, and we see it as a first step to continue exploring other similar instruments in the future, such as sustainability-linked bonds,” said Andrés del Valle, VP corporate finance of LATAM Airlines Group.
He added: “This milestone not only reinforces the commitment to being a more sustainable group, hand in hand with the strategy and actions focused on climate change, circular economy, and shared value, but also allows LATAM to be a pioneer in promoting sustainability-related finance in the aviation sector in the region.”
The loan represents the refinancing of LATAM’s long-standing spare engine facility (SEF), which has been a critical component of its capital structure for over a decade. This refinancing delivered multiple advantages, including a significant reduction in the interest rate, enhanced collateral efficiency by reducing the number of engines pledged and an extension of the loan's maturity.
The transaction includes sustainability-linked provisions where LATAM may receive pricing adjustments based on its performance against the carbon emission intensity of its operations.
Additionally, this inaugural sustainable finance transaction will aim to support the group’s goal of achieving net-zero emissions by 2050.