LATAM Airlines Group and select of its entities in Chile, Colombia, Ecuador, Peru, and the United States have filed for Chapter 11 financial reorganisation in the United States Bankruptcy Court for the Southern District of New York citing the impact of the COVID-19 pandemic.

If the application is successful, Chapter 11 will allow the carrier holding to restructure its debt obligations with creditors. The group's largest shareholders include the Cueto family-owned Cueto Group (acting through its various subsidiaries) with 21.46%; Delta Air Lines (DL, Atlanta Hartsfield Jackson) with 20%; and Qatar Airways Investments (UK) Ltd. with 10%. So far, Cueto Group as well as Qatar Airways (QR, Doha Hamad Int'l) have collectively committed USD900 million in additional financing to tide the firm through the process.

LATAM Airlines Group said in a statement that while most of its affiliates are included in the reorganisation process, several entities are not, due to the nature of their debt structure and current financial status.

Those that are included in the US Chapter 11 filing are:

  1. LATAM Airlines Group S.A.;
  2. Lan Cargo S.A. t/a LATAM Cargo Chile;
  3. Transporte Aéreo S.A. t/a LATAM Express;
  4. Inversiones Lan S.A.;
  5. Lan Pax Group S.A.;
  6. Fast Air Almacenes de Carga S.A.;
  7. LATAM Travel Chile II S.A.;
  8. Technical Training LATAM S.A.;
  9. Lan Cargo Inversiones S.A.;
  10. Holdco Colombia I SpA;
  11. Holdco Colombia II SpA;
  12. Línea Aérea Carguera de Colombia S.A. t/a LATAM Cargo Colombia;
  13. Aerovías de Integración Regional S.A. t/a LATAM Airlines Colombia;
  14. Holdco Ecuador S.A.;
  15. LATAM Finance Ltd.;
  16. Peuco Finance Ltd.;
  17. LATAM Airlines Perú t/a LATAM Airlines Perú;
  18. Inversiones Aéreas S.A.;
  19. Mas Investment Ltd;
  20. Lan Cargo Overseas Ltd.;
  21. LATAM Airlines Ecuador S.A. t/a LATAM Airlines Ecuador;
  22. Professional Airline Cargo Services, LLC;
  23. Cargo Handling Airport Services, LLC;
  24. Connecta Corporation;
  25. Prime Airport Services Inc.;
  26. Maintenance Service Experts, LLC;
  27. Lan Cargo Repair Station LLC;
  28. Professional Airline Maintenance Services LLC;
  29. Professional Airlines Services Inc.

In Chile, LATAM Airlines Group S.A. and certain other entities incorporated in Chile will also file recognition proceedings in Chilean courts in order to ensure that the Chapter 11 process is given full credit and effect. LATAM has asked the Government of Chile to consider providing financial support but although meetings between state and airline officials have taken place, no formal talks concerning aid have yet begun.

In Colombia, LATAM Airlines Colombia and other entities incorporated in Colombia will also file recognition proceedings in the Superintendencia de Sociedades. There, while LATAM Colombia has requested financial assistance from the government, no talks have taken place as of yet.

In Peru, LATAM Airlines Perú and other entities incorporated in Peru will also file a “Preventative Reorganisation Process” with INDECOPI in order to ensure to these businesses are further protected from adverse actions of creditors.

In Ecuador, LATAM Airlines Ecuador has been included in the US Chapter 11 filing alongside all of the group’s US-based operating entities, other than special purpose vehicles.

Those entities that are not included in the US Chapter 11 filing are LATAM’s affiliates in Argentina (LATAM Airlines Argentina), Brazil (LATAM Airlines Brasil, LATAM Cargo Brasil, and TAM - Táxi Aéreo Marília), and Paraguay (LATAM Airlines Paraguay).

LATAM highlighted that its affiliates in Brazil are in discussions with the Brazilian government about the next steps and financial support for their Brazilian operations. According to a Chilean stock market filing issued on May 18, LATAM Brasil received a letter from BNDES and certain Brazilian commercial banks on May 12 about potential financing for the country's air transport sector. The support proposal, in terms of amounts, conditions, guarantees and maturities, would entail a 75/25 debt and equity structure which LATAM has expressed an interest in using.

LATAM Airlines Group highlighted that, whether included in the filing or not, all of the companies in the group will continue to operate as travel restrictions and demand permit.

In terms of creditors, the largest five creditors with secured claims include Wilmington Trust Company with a claim of USD777.5 million on collateral of eleven A321s, two A350s, and four B787s. Next is Citibank, N.A., Loan Administration with a claim of USD603.1 million against collateral of 26 aircraft and 15 engines and spare parts. Thereafter, Crédit Agricole CIB follows with a claim of USD274.37 million against collateral of 41 engines while Wells Fargo Bank Northwest NA Trustee is owed USD276.9 million against nine B767s. Natixis Lease rounds up the lot with a claim of USD242.99 million against nine A321s used as collateral.

The largest unsecured claims are made up of its 2024 and 2026 bondholders due USD700 million and USD800 million respectively.

As of December 31, 2019, LATAM Airlines Group S.A. said it had total assets of USD21 billion against total debts of almost USD18 billion.

Editorial Comment: Updates status of talks with Brazil, Colombia, and Chile governments regarding financial assistance - 26.05.2020 - 09:58 UTC