Chapter 11: LATAM obtains support from bondholders and creditors for its Reorganization Plan

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Chapter 11: LATAM obtains support from bondholders and creditors for its Reorganization Plan

LATAM Airlines Group SA and its subsidiaries in Brazil, Chile, Colombia, Ecuador, Peru and the United States obtained the support of practically all of the creditors for its Reorganization Plan, 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 creditors (led by Sixth Street, Strategic Value Partners and Sculptor Capital) and the main shareholders of the group (the “Supporting Shareholders” , and together with the aforementioned Ad Hoc group of guarantor creditors, the “Supporting Parties”).

This agreement was presented to the Court in the United States today within the framework of the Chapter 11 process carried out by LATAM.

“For some time now we have promoted consensus among our creditors and this is a great achievement. The agreement undoubtedly benefits all parties, attracts the support of the Reorganization Plan from the vast majority of the Group’s creditors and will allow LATAM to meet its objective of exiting Chapter 11 within the established timeframes and with a more competitive position than at start of the pandemic”, said Roberto Alvo, CEO of LATAM Airlines Group SA

The agreement will allow the creditors who choose to receive the Class A Convertible Bonds or the Class C Convertible Bonds contemplated in the Reorganization Plan, to improve their recovery through an additional cash payment. To achieve the above, LATAM will make available to you the amount in cash of:

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(a) approximately US$212 million or, to the extent that the EBITDAR of the original business plan is exceeded by more than US$100 million by the EBITDAR that LATAM generates between January 1, 2022 and the date that corresponds to 15 days before departure from Chapter 11,

(b) approximately US$250 million, plus, in this case, and additionally, the amount that represents 75% of the excess over US$250 million of the EBITDAR that LATAM generates with respect to the EBITDAR of the original business plan in the same period referred to above, to exist.

The final amount that said creditors may receive will be subject to possible deductions associated with pending agreements within the process and the cost associated with potential extensions under the support agreements signed with the Supporting Parties.

This additional cash payment will be distributed among the creditors who choose to receive the Class A Convertible Bonds and the Class C Convertible Bonds; provided, however, that the creditors who participate exclusively in the Class A Convertible Bonds will be entitled to receive a cash payment of at least 4.875% of the value of their credits, and those who participate in both the New Convertible Bonds Class A as in the New Class C Convertible Bonds and who are not Supporting Creditors, will be entitled to receive half of said payment with respect to the part of their credits that participate in the New Class A Convertible Bonds.

Among other things, the agreement considers that the valistas creditors (that do not correspond to Supporting Parties) may alternatively choose to receive as dation in payment for their credits, a new 20-year UF bond with a total cap of US$180 million. The foregoing, instead of receiving the convertible bonds contemplated in the Reorganization Plan and the additional cash payment indicated above.

In turn, the agreement contemplates that a part of the creditors with bonds issued in Chile will be included so that they participate in the Backstop Agreement.

On the other hand, the UCC and the bondholders in Chile will withdraw their objections to the Plan and support it before the Court.

The Reorganization Plan Confirmation Hearing is scheduled for May 17 and 18, 2022, at which time the Court will evaluate said Plan, the last milestone in the bankruptcy process in the United States. LATAM continues to target completion of the process and exit from Chapter 11 in the second half of 2022.

The Plan continues to contemplate resources of US$8,190 million, through a capital increase, the issuance of 3 series of convertible bonds and new debt.

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