LATAM Airlines Brazil has joined its Chile-based parent company LATAM and filed for Chapter 11 bankruptcy in the United States. Meanwhile, the parent company LATAM gained enough funds to weather the current pandemic.
The Brazilian subsidiary began its voluntary reorganization process in order to restructure debts and fleet while still continuing to fly, stated a press release by the company.
“LATAM Airline Brazil’s decision is a natural step in light of the continuing COVID-19 pandemic,” the statement read. The bankruptcy proceedings would allow the company to access Debtor-In-Possession (DIP) financing. The São Paulo, Brazil-based airline hopes this would provide the means of financing to operate and adapt to a new reality.
Meanwhile, LATAM confirmed that it has received two tranches, that amount to $2.2 billion in additional funding. Tranche C, comprising of $900 million, was committed by Qatar Airways and two shareholder families. Tranche A, $1.3 billion, was committed by Oaktree Capital Management, but still has to be approved by the Court of the Southern District of New York.
A further $250 million would be added from shareholders from Chile, once the court approves their participation in the proceedings.
“LATAM has taken a significant step in ensuring its operational continuity by securing the commitment of Oaktree Capital Management and its affiliates for the total financing of Tranche A. We hope that, together with Tranche C, it will be approved by the court in the coming weeks,” stated Roberto Alvo, the chief executive officer (CEO) of LATAM Airlines Group.
The support of the two principal shareholders has been essential, added Alvo, as this helped the airline group “to secure all the resources that are required to continue operating during the crisis” and exit Chapter 11 proceedings.
LATAM Brazil will still pursue state aid, as it continues negotiations with Brazil’s National Bank for Economic and Social Development (BNDES), indicated the company.