Latam moves towards confirmation of the plan, but its assessment will have a new analysis

Latam moves towards confirmation of the plan, but its assessment will have a new analysis

Financial Newspaper – Santiago

For the third time in the week, Latin America Airlines went before the court that is conducting its reorganization process, in a hearing that was convened late on Wednesday, with a view to hearing the verdict of Judge James L. Garrity regarding claims filed with his office.

The online meeting sought to settle objections from the group of claim holders, TLA Claim Holders, who challenged the reorganization plan, specifically against TAM Linhas Aereas. He pointed out that the proposal proposes to pay 100% of the Class 6 claims, “but it deprives the holders of said claims of any post-petition interest. At the same time, the plan denies those creditors the right to vote.” And it stresses that “stripping creditors of their negotiated interest rights is a violent alteration of their ‘legal, equitable and contractual rights’”.

The accusation that Latam had not complied with its obligations “by refusing to carry out reasonable and diligent electronic searches of documents” that were required by the counterparty, and that the letters with the Brazilian company Azul, were also addressed. about his intention to buy the Chilean firm.

And then reference was made to the Latam Pass loyalty program, the subject of discussion the day before.

The verdict
The claim holders contend that the mileage mechanism “is an asset of substantial value and that the debtor almost completely ignores that asset in its valuation and creditworthiness analysis.”

However, the company has pointed out that it cannot be considered an asset because its value is only tangible when it is sold. Added to this are the “agreements with credit card companies that pay for frequent flyer miles, which they deliver to their own customers when they incur charges on the card.”

These are liabilities that the firm must pay upon exiting the Chapter 11 and that have an impact on the final valuation. After detailing each position, Garrity gave his verdict, with two decisions in favor of Latam and one against.

Regarding the letters with Azul, the judge denied the motion considering that the counterpart “exaggerates its importance” in the process. He also rejected the request to compel the debtor to conduct additional electronic searches of his documents. “The Court is satisfied that … the search they conducted is appropriate,” he said.

However, Garrity did find in favor of the claimants in that he considered that “the valuation could include information that is relevant to the liquidation analysis of Mr. (Brock) Edgar -senior general director of the FTI consultancy, who made the analysis- and that the debtors did not present it to him in a timely manner”.

Thus, he authorized that statement to be reopened to question him about the impact that the appraisal has on his analysis. Latam and the TLA group must meet to organize the limited declaration, in the next 48 hours.

In order to emerge from bankruptcy, the Chilean airline plans to raise around US$5 billion by issuing convertible bonds and shares to its creditors and shareholders. As a result, a group of investment funds led by SVPGlobal, Sculptor Capital Management and Sixth Street Partners is in line to own Latam Airlines.


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