Secures financial support of shareholders, including Qatar Airways, for up to $900m
LATAM Airlines Group and its affiliates will continue flying with no impact on passenger or cargo operations
LATAM Airlines Group and its affiliates in Chile, Peru, Colombia, Ecuador and the US have initiated a voluntary reorganization and restructuring of their debt under Chapter 11 protection in the US.
LATAM Airlines Group and its affiliates will continue flying with no impact on passenger or cargo operations. LATAM’s affiliates in Argentina, Brazil and Paraguay are not included in the filing.
The group has secured the financial support of shareholders, including the Cueto and Amaro families, which have lasting ties to LATAM, and Qatar Airways, to provide up to $900m in debtor-in-possession (DIP) financing.
Latin American carriers are suffering due to the effect of Covid-19 on passenger numbers. On May 11, Colombian airline Avianca and certain of its subsidiaries filed voluntary petitions under Chapter 11 of the US Bankruptcy Code.
A LATAM statement said: “In light of the effects of COVID-19 on the worldwide aviation industry, this reorganization process provides LATAM with an opportunity to work with the group’s creditors and other stakeholders to reduce its debt, access new sources of financing and continue operating, while enabling the group to transform its business to this new reality.
“The Chapter 11 financial reorganization process is a proven legal framework under which LATAM and said affiliates will have the opportunity to resize their operations to the new demand environment and reorganize their balance sheets, enabling them to emerge more agile, resilient and sustainable. LATAM and its affiliates will continue flying as conditions permit throughout the process.”
LATAM chief executive Roberto Alvo said: “LATAM entered the COVID-19 pandemic as a healthy and profitable airline group, yet exceptional circumstances have led to a collapse in global demand and has not only brought aviation to a virtual standstill, but it has also changed the industry for the foreseeable future.
“We have implemented a series of difficult measures to mitigate the impact of this unprecedented industry disruption, but ultimately this path represents the best option to lay the right foundation for the future of our airline group. We are looking ahead to a post-COVID-19 future and are focused on transforming our group to adapt to a new and evolving way of flying, with the health and safety of our passengers and employees being paramount.”
On the financial support from the Cueto and Amaro families and Qatar Airways, the statement added: “These partners have a profound understanding of the industry, the group and its operational challenges. Their support demonstrates a belief in LATAM and its affiliates and their long-term sustainability.
“To the extent permitted by law, the group would welcome other shareholders interested in participating in this process to provide additional financing. In addition, as of the filing, the group had approximately $1.3bn in cash on hand.”
LATAM and its affiliates are also in discussions with their respective governments of Chile, Brazil, Colombia and Peru to assist in sourcing additional financing, protect jobs where possible and minimize disruption to its operations.
Ignacio Cueto, chairman of LATAM’s Board of Directors, said: “Faced with the biggest crisis in the history of aviation, the Board has approved this path forward having analyzed all the available alternatives to ensure the sustainability of the group.
“As we have adapted to new realities in the past, we are confident that LATAM will be able to succeed in the post-COVID-19 context and continue to serve Latin America, connecting the region with the world.”
