LATAM goes one step further in its Chapter 11 process and secures exit financing

LATAM Group informs that after carrying out an exhaustive process of searching for the best available conditions for its financing to exit the Chapter 11 process, it has signed financing commitment letters for this purpose with different financial entities, which represents a sign of trust from the market to LATAM and allows the group to take another step towards exiting the Chapter 11 process during the second half of 2022, with a more solid financial structure.

This exit financing is part of the restructuring contemplated in the Reorganization Plan and considers new debt for US$2,250 million and a new committed credit line for US$500 million and is subject to the approval of the United States Court. The financial entities with which the exit financing commitment letters were signed are: JPMorgan Chase Bank, NA, Goldman Sachs Lending Partners LLC, Barclays Bank PLC, BNP Paribas, BNP Paribas Securities Corp., and Natixis, New York Branch.

“This commitment assures us of all the financing required to complete our restructuring plan and, very importantly, with a degree of flexibility that allows us to optimize existing market conditions.  The US$2.25 billion of debt is in addition to the US$5.4 billion of equity that we secured in January of this year. This is another important step to get out of Chapter XI, as a strengthened airline group", said the CEO of LATAM Airlines, Roberto Alvo.

The exit financing commitment letters also contemplate a financing of US$1,172 million that will be granted during the term of the Chapter 11 process (that is, before its exit) in the form of a DIP financing ( debtor-in- possession ) with less preference for payment than exit financing (“Junior DIP Financing”). The financial entities with which the letter of commitment for the Junior DIP Financing was signed are: Delta Air Lines, Inc., Lozuy SA, Costa Verde Aeronautica SA, QA Investments Limited, and members of the ad hoc group of LATAM creditors represented by Evercore.

The exit financing has been structured as DIP financing ( debtor-in-possession).) that will be granted during the Chapter 11 process. Notwithstanding the foregoing, and unlike the DIP financing currently in force (the “Existing DIP Financing”), it has been structured so that, subject to the fulfillment of certain customary conditions in this type of operations , remain in effect after LATAM emerges from the Chapter 11 process. Consequently, to the extent that such conditions are met, on the date of exit from the Chapter 11 process the exit financing will automatically convert into a financing that will remain in force. subsequently. The foregoing does not apply with respect to the Junior DIP Financing, which must be fully amortized prior to leaving the Chapter 11 Procedure.

The resources obtained by virtue of the exit financing and the Junior DIP Financing will be used in part to fully amortize the Existing DIP Financing during the term of the Chapter 11 process.

The exit financing has been structured as follows:

● US$500 million, for a revolving line of credit ( Exit Revolving Facility ), which will accrue interest, at LATAM's election, alternatively according to: (i) ABR plus an applicable margin of 3%; or (ii) Adjusted Term SOFR plus an applicable margin of 4%.

● US$750 million, for term financing ( Term B Loan Facility ), which will accrue interest, at LATAM's election, alternatively according to: (i) ABR plus an applicable margin to be determined at the time of contracting; or (ii) Adjusted Term SOFR plus an applicable margin to be determined at the time of contracting.

● US$750 million, for a bridge loan to 5-year bonds.

● US$750 million, for a bridge loan to 7-year bonds.

The interest rate under the aforementioned bridge loans will be determined based on the market conditions available at the time of closing, subject in any case to certain limits established in the financing commitment letters.

On the other hand, LATAM is awaiting the ruling of the United States Court regarding its Reorganization Plan, which has the substantial support of the creditors that represent nearly 90% of the unsecured debts of the parent company. This was done after reaching an agreement with the holders of bonds issued in Chile (including those represented by BancoEstado), the Official Committee of Valista Creditors (UCC), the Ad Hoc group of LATAM surety creditors (led by Sixth Street, Strategic Value Partners and Sculptor Capital) and the main shareholders of the group (Delta Air Lines, Qatar Airways, Grupo Cueto).