Against the clock: airline would be among four alternatives to reformulate its financial plan

The new proposal, which would be known soon, would seek to prevent a judge from having to carry out a time-consuming analysis.

Since early Friday, Latam Airlines has been in marathon sessions to quickly define the reformulation of the Debtor-In-Possession (DIP) financing mechanism, after Judge James L. Garrity rejected its original package. for containing a formula that allowed owners to transform their debt into shares.

Sources within the airline commented that the main objective of these meetings is to obtain a financing structure as soon as possible and that they even planned to have the mechanism ready for Sunday, but that due to the high complexity of the case the process has been extended. As of press time, the final formula was not yet known.

“We learned from the previous stage that this is not a quick judge, and this leads us to rule out options whose development is very extensive,” they explained.

It is for this reason that all alternatives that radically modify the content of the original DIP financing have been ruled out in the race, so that Garrity approves it quickly. Thus, on the table, four options were handled yesterday.

Range of options

The options that have been discussed are, in the first instance, that Latam and its shareholders discard the convertibility of the shares linked to Tranche C of the DIP financing, where US $ 900 million were committed.

When set as a simple loan, the 27% interest rate would allow the Cueto, Amaro, Eblen families and their partner Qatar Airways to raise money so that in an eventual capital increase they acquire papers from the firm. A second option that could be triggered is for Latam and Jefferies to reach a point of agreement to present a joint DIP financing, which would come with a correction of the economic proposal by the investment fund.

However, another source revealed to DF Mas that one idea is to add funds strongly linked to the US. That way, Garrity would soon define who and how they contribute the $ 2.2 billion to the airline. Of that, $ 1,300 was already – and would continue to be – committed by Oaktree. The urgency of the airline is not less. As of September, it has a cash box of US $ 960 million and by the end of the month it is expected to decrease to US $ 700 million. Even so, little by little the firm has been resuming flights, reaching a capacity of 13.6% in August (measured in “available seat-kilometer” -ASK).


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