LATAM Group has successfully completed its financial restructuring in the United States with over $2.2bn liquidity and approximately US$3.6bn less debt on its balance sheet. The restructuring was completed through a Chapter 11 process in the US Bankruptcy Court and is one of the largest Chapter 11 restructurings undertaken for a non-US airline.
The Group had voluntarily commenced this restructuring process to reduce its debt, access new sources of financing, and transform its business in response to the global pandemic, after almost 30 months.
Roberto Alvo, CEO of LATAM Airlines Group, said: “Today marks an important milestone for LATAM and our stakeholders. We are pleased that we have completed a significant transformation and emerged from our financial restructuring process with a strengthened financial position and a renewed commitment to operational excellence."
LATAM filed for Chapter 11 protection in May 2020 and exited the process on 3rd November 2022. As special aircraft counsel, the Norton Rose Fulbright team advised LATAM on the restructuring of its fleet and financing contracts throughout the Chapter 11 process.
The firm worked on the restructuring of complex lease financing structures, including the restructuring of the airline's JOLCO financings, securing long-term lease commitments from LATAM's Lessor group and the documentation of new lease commitments as LATAM re-organised its fleet. The firm also worked with the LATAM team to restructure key debt commitments and document new financing commitments prior to the company's emergence from Chapter 11
Partner Owen Mulholland said: “The LATAM Chapter 11 restructuring was a fascinating, and challenging, case to work on. The Norton Rose Fulbright team is delighted to see the restructuring come to a successful conclusion for LATAM and to have supported the LATAM team throughout the process."
Going ahead, Credit Agricole CIB & PK AirFinance, as joint Arrangers, have closed a $275million engine financing with LATAM Airlines as part of the company’s exit from Chapter 11 bankruptcy protection. This transaction provides LATAM continued financing for their spare engine fleet through 2027.
Post the restructuring, LATAM Group has reported a 35% debt reduction from the pre-filing period. Now with the support of key incumbent and new shareholders like Sixth Street, Strategic Value Partners, and Sculptor Capital Management, and its incumbent strategic shareholders, Delta, Qatar, and the Cueto family, LATAM is poised to reaffirm its leadership in South America and has positioned itself for long-term sustainability.
"As a group with a dynamic team of 30,000 employees and an unrivaled connectivity network, we look forward to continuing to offer passengers and cargo clients the best alternative for travel to, from, and within South America and to contribute in the broader sense to the various countries in which we operate and their diverse interests,” Alvo added.
LATAM recently entered into an agreement with Airbus to acquire a total of 87 A320neo aircraft by 2029. LATAM has resumed the renewal of its fleet, with the addition of A321neo aircraft, including the A321XLR version, while withdrawing its A350 from service, keeping the Boeing 767, 777 and 787 in the long-haul network.
LATAM Cargo is also planning a robust expansion of its cargo fleet to a total of 20 767-300F aircraft in 2024. Besides LATAM Cargo has implemented its new end-to-end system in the international markets and developed a solution for the domestic markets to offer more and better online tools for all its clients.
LATAM Group reached around 144 destinations in 22 countries as of October 2022, and it expects to close the year with a global operation footprint of more than 85% compared to 2019. Between 2021 and 2022, the group added 10 new destinations in Brazil and plans to operate 36 new routes by 2023.
LATAM claims to have emerged from the reorganisation as a more efficient group, with a modernised fleet, the most extensive network of connections in South America, and the continent’s largest loyalty program. The Group expects to recover 85% of its global capacity in 2019 by the end of 2022.
LATAM also received the Airline Economics Aviation 100 Americas Restructuring Deal of the Year. Full details in Issue 69 of Airline Economics to be released shortly.