LATAM AIRLINES FILES BANKRUPTCY

LATAM Airlines Group S.A. (“LATAM”) (NYSE: LTM; SP IPSA: LTM) and its affiliates in Chile, Peru, Colombia, Ecuador and the United States today filed for Chapter 11 bankruptcy protection in the United States, citing travel restrictions related to the Coronavirus COVID-19 Pandemic. Under US law, a “chapter 11” bankruptcy allows for continued operations under government supervision and negotiation of expense and debt. In certain cases, creditors can still force a liquidation.

“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,” said Roberto Alvo, Chief Executive Officer of LATAM. “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.”

Qatar Airways along with the Cueto and Amaro families, all major shareholders, have agreed to provide up to $900 million in debtor-in-possession financing to the airline. To the extent permitted by law, the group says that they would welcome other shareholders interested in participating in this process to provide additional financing. As of the filing, the group had approximately USD$1.3 billion 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. In 2019, the group launched 26 new routes and transported a record 74 million passengers, 5.4 million more than in 2018. The group’s plans for 2020 included further enhancing its passenger experience through cabin transformations and strengthening its strategic partnerships to further connect Latin America with the world.

“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,” said Ignacio Cueto, Chairman of LATAM’s Board of Directors. 

LATAM is advised in this process by Cleary Gottlieb Steen & Hamilton LLP and Claro & Cia. as legal advisors, FTI Consulting as financial advisor and PJT Partners as investment banker.

Operational continuity expected

According to the airline:

• LATAM Airlines Group S.A. and its affiliates will continue to operate passenger and cargo flights, subject to demand and travel restrictions.
• All current and future tickets, travel vouchers and frequent flyer miles and benefits, as well as flexibility policies, will be honored.
• The group’s employees will continue to be paid and receive benefits as provided in their employment agreements.
• Suppliers will be paid in a timely fashion for goods and services delivered from May 26, 2020 forward and throughout this process.
• Travel agencies and other commercial partners will experience no disruption in their interactions with the LATAM group.

While most of LATAM’s affiliates are included in the reorganization process, several entities are not, due to the nature of their debt structure and current financial status. A full list of filing entities is available at cases.primeclerk.com/LATAM. The list below summarizes the inclusion of these entities in the Chapter 11 financial reorganization and other proceedings.

Material filing entities:

• Chile: LATAM Airlines Group S.A. and certain other entities incorporated in Chile are included in the Chapter 11 filing and will also file recognition proceedings in Chilean Courts in order to ensure that the Chapter 11 process is given full credit and effect, providing even greater protection to LATAM’s businesses.
• Colombia: LATAM Airlines Colombia and other entities incorporated in Colombia are included in the Chapter 11 filing and will also file recognition proceedings in the Superintendencia de Sociedades in order to ensure that the Chapter 11 process is given full credit and effect, providing even greater protection to LATAM’s businesses.
• Peru: LATAM Airlines Perú and other entities incorporated in Peru are included in the Chapter 11 filing and are also filing a “Preventative Reorganization Process” with INDECOPI in order to ensure to these businesses are further protected from adverse actions of creditors.
• Ecuador: LATAM Airlines Ecuador is included in the Chapter 11 filing.
• United States: All of the group’s operating entities, other than special purpose vehicles, in the United States are included in the Chapter 11 filing.

Non-filing entities

• Argentina, Brazil and Paraguay: LATAM’s affiliates in Argentina, Brazil and Paraguay are not included in the Chapter 11 filing. LATAM’s affiliates in Brazil are in discussions with the Brazilian government about the next steps and financial support for their Brazilian operations.

LATAM Airlines Group group has created a dedicated website: www.LATAMreorganizacion.com, where stakeholders can find additional key information about what this announcement means for them, and also established a hotline for Chapter 11-related inquiries, which can be accessed at (929) 955-3449 or (877) 606-3609 in the U.S. and Canada. International toll-free numbers will be available on www.LATAMreorganizacion.com in the coming days. It also has a dedicated email for inquiries related to the reorganization at [email protected].