LATAM Airlines Group S.A. (“LATAM”) (SSE: LTM) and its affiliates in Brazil, Chile, Colombia, Ecuador, Peru, and the United States today announced the filing of a Plan of Reorganization (the “Plan”), which reflects the path forward for the group to exit Chapter 11 in compliance with both U.S. and Chilean law. The Plan is accompanied by a Restructuring Support Agreement (the “RSA”) with the Parent Ad Hoc Group, which is the largest unsecured creditor group in these Chapter 11 cases, and certain of LATAM’s shareholders. The RSA documents the agreement between LATAM, the aforementioned holders of more than 70% of parent unsecured claims and holders of approximately 48% of 2024 and 2026 U.S. Notes, and certain shareholders holding more than 50% of common equity, subject to the execution of definitive documentation by the parties and the obtaining of corporate approvals by those shareholders. As they have throughout the process, all of the companies in the group are continuing to operate as travel conditions and demand permit.

“The last two years have been characterized by hardship across the globe – we have lost friends and family, colleagues and loved ones. And we have reeled as global aviation and travel were brought to a virtual standstill by the largest crisis to ever face our industry. While our process is not yet over, we have reached a critical milestone in the path to a stronger financial future,” said Roberto Alvo, Chief Executive Officer of LATAM Airlines Group S.A. “We are grateful to the parties who have come to the table through a robust mediation process to reach this outcome, which provides meaningful consideration to all stakeholders and a structure that adheres to both U.S. and Chilean law. Their infusion of significant new capital into our business is a testament to their support and belief in our long-term prospects. We are thankful for the exceptional team at LATAM that has weathered the uncertainty of the past two years and enabled our business to keep operating and serving our customers as seamlessly as possible.”

Plan Overview

The Plan proposes the infusion of $8.19 billion into the group through a mix of new equity, convertible notes, and debt, which will enable the group to exit Chapter 11 with appropriate capitalization to effectuate its business plan. Upon emergence, LATAM is expected to have total debt of approximately $7.26 billion and liquidity of approximately $2.67 billion. The group has determined that this is a conservative debt load and appropriate liquidity in a period of continued uncertainty for global aviation and will better position the group going forward.

Specifically, the Plan outlines that:

• Upon confirmation of the Plan, the group intends to launch an $800 million common equity rights offering, open to all shareholders of LATAM in accordance with their preemptive rights under applicable Chilean law, and fully backstopped by the parties participating in the RSA, subject to the execution of definitive documentation and, with respect to the backstopping shareholders, receipt of corporate approvals;
• Three distinct classes of convertible notes will be issued by LATAM, all of which will be preemptively offered to shareholders of LATAM. To the extent not subscribed by LATAM’s shareholders during the respective preemptive rights period:
• Convertible Notes Class A will be provided to certain general unsecured creditors of LATAM parent in settlement (dación en pago) of their allowed claims under the Plan;
• Convertible Notes Class B will be subscribed and purchased by the above referenced shareholders; and
• Convertible Notes Class C will be provided to certain general unsecured creditors in exchange for a combination of new money to LATAM and the settlement of their claims, subject to certain limitations and holdbacks by backstopping parties.

The convertible notes belonging to the Convertible Classes B and C will therefore be provided, totally or partially, in consideration of a new money contribution for the aggregate amount of approximately $4.64 billion fully backstopped by the parties to the RSA, subject to receipt by the backstopping shareholders of corporate approvals;

• LATAM will raise a $500 million new revolving credit facility and approximately $2.25 billion in total new money debt financing, consisting of either a new term loan or new bonds; and
• The group also used and intends to use the Chapter 11 process to refinance or amend the group’s pre-petition leases, revolving credit facility, and spare engine facility.

Additional Information
The hearing to approve the adequacy of the Chapter 11 Disclosure Statement and approve voting procedures is expected to be held in January 2022, with specific timing dependent on the Court’s calendar. If the Disclosure Statement is approved, the group will commence solicitation during which it will seek approval of the Plan from creditors. LATAM is requesting the hearing to confirm the Plan be held in March 2022.