LATAM Airlines completes debtor-in-possession loan
14 October 2020
Multiple international and Latin American law firms have helped in the closing of LATAM Airlines’ US$2.45 billion debtor-in-possession (DIP) financing, after overcoming several judicial hurdles.
Cleary Gottlieb Steen & Hamilton LLP in New York, Chile’s Claro & Cía, Demarest Advogados in São Paulo, Rodrigo, Elías & Medrano Abogados in Lima, Philippi Prietocarrizosa Ferrero DU & Uría (Peru) and Ecuador’s Pérez Bustamante & Ponce advised the airline.
Baraona Fischer & Cía in Santiago advised Chilean investors Cueto Group and Eblen Group as shareholders of LATAM, while Alston & Bird LLP in New York, Chilean firm Carey, Brazil's Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados, Heka Law Firm in Quito, Houthoff in Amsterdam, Estudio Olaechea in Lima and Posse Herrera Ruiz in Bogotá all advised one of the company's other shareholders, Qatar Airways. The three shareholders also provided part of the financing.
White & Case LLP in New York, Miami and Los Angeles, Cescon, Barrieu, Flesch & Barreto Advogados in São Paulo, Ferrere (Ecuador) and three DLA Piper LLP offices advised US investor Oaktree Capital Management as lender. Quinn Emanuel Urquhart & Sullivan LLP in New York and Hogan Lovells LLP advised US lender Knighthead while Davis Polk & Wardwell LLP in New York and Barros & Errázuriz Abogados in Santiago advised stakeholder Delta Air Lines. Dechert LLP in New York advised a group of creditors for the transaction.
Separate teams of Cescon Barrieu and DLA Piper (Peru) advised TMF’s Brazilian and Peruvian branches respectively as local collateral agents.
The deal closed on 8 October, after the US Bankruptcy Court for the Southern District of New York approved the financing on 18 September. The closing took place only days after Colombian counterpart Avianca obtained a US$2 billion DIP financing early last week.
LATAM’s final DIP deal comes after several court hearings over the last few months. Creditors objected to the airline’s first DIP loan proposal in mid-July, claiming that the US$2.45 billion deal was too expensive and that the package unfairly permitted lenders to exchange debt for equity at a discounted rate. On 10 September, LATAM submitted a modified request to the New York bankruptcy court, but that request was rejected by the judge, who said the deal threatened to create an unfair share of equity between stakeholders.
Latin Lawyer understands several other international and Latin American law firms may have been involved in the final closing of the deal too, but this could not be confirmed prior to publication.
The DIP financing is divided into several tranches. In the first portion, Oaktree will lend US$1.125 billion instead of US$1.3 billion, as was suggested in the original proposal. US lenders Knighthead and Jeffries will provide the remaining US$175 million to bring the combined amount of the first tranche to US$1.3 billion.
In the second tranche, LATAM is set to receive US$750 million from Qatar Airways, the Cueto Group and the Eblen Group, while either Knighthead or Jeffries will provide another US$150 million. LATAM will receive the last US$150 million from either new or other existing shareholders.
DIP financings form part of restructuring proceedings and allow a company to continue its operations during such process.
LATAM first filed for Chapter 11 bankruptcy proceeding in New York in May, after travel restrictions – imposed to fight the covid-19 pandemic – had a huge financial impact on Latin America’s aviation industry. The filing took place just weeks after Colombian counterpart Avianca began its own bankruptcy proceeding in New York. In June, Mexican airline Aeroméxico followed in their footsteps and filed for bankruptcy in New York too.
LATAM, which is Latin America’s largest aviation group, reported a 75% revenue drop in the second quarter of 2020 compared with the same time period last year, as well as a 94% decrease in passenger revenues.
Counsel to LATAM Airlines Group
In-house counsel - Juan Carlos Mencio
Cleary Gottlieb Steen & Hamilton LLP
Partners Jeff Lewis, Rich Cooper, Lisa Schweitzer and Luke Barefoot, and senior attorneys Kara Hailey and Carina Wallance in New York
Claro & Cía
Partners Jose María Eyzaguirre, Nicolás Luco, José María Eyzaguirre and Felipe Larrain, and associate Gerardo Otero and Josefina Covarrubias in Santiago
Partners Celso Xavier, Thiago Giantomassi, Guilherme Bechara, Christiano Chagas and Marc Stalder, and associates Marcelo Peloso and Caio Secchi in São Paulo
Rodrigo, Elías & Medrano Abogados
Partner Guillermo Puelles and associates Francisco Carrillo and Renzo Rossi in Lima
Philippi Prietocarrizosa Ferrero DU & Uría (Peru)
Partner Ronald Fernandez Davila and associate Fiorella Ruiz del Campo in Lima
Pérez Bustamante & Ponce
Partner Diego Pérez-Ordóñez and associates Andrés Brown, José David Ortiz Custodio and Víctor Cabezas in Quito
Counsel to the Eblen Group and the Cueto Group
Baraona Fischer & Cía
Partners Alfonso Ugarte and Cristóbal Herrera and associates Fernanda Anguita, María Jesús Hernández and Raúl Campaña in Santiago
Counsel to Qatar Airways
Alston & Bird LLP
Partners Gerard Catalanello, Paul Hespel, James Vincequerra, Steven Campbell and Sam Kaywood,
and associates David Rutherford, Heather Ripley, Reade Seligmann, Geoffrey Williams, Aimee Pickett Sanders, Chris Coleman, and Jill Luby in New York
Partners Jaime Carey, Diego Peralta, Pablo Iacobelli and Ricardo Reveco, and associates Jaime Carey Jaime Coutts in Santiago
Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados
Partners Marcelo Sampaio Góes Ricupero, Alex Hatanaka, Frederico Kerr Bullamah and Adriana Simões and associates Raphael Saraiva, Lucca Rizzo and Thaiana Tavares Labolita in São Paulo
Counsel Jeroen Vossenberg and associate David Heems in Amsterdam
Heka Law Firm
Partners Mauricio Subía and Cristina Viteri and associate Martina Holguín in Quito
Partner Carlo Viacava and associates Valery Vicente and July Choy in Lima
Posse Herrera Ruiz
Partner Mariana Posse and associates Lina María Lineros, Juan Pablo Bonilla and Sebastián Echeverri in Bogotá
Counsel to Oaktree Capital Management
White & Case LLP
Partners Tom Lauria and Michael Shepherd and associates Laura Femino and Andrew Maury in Miami; partners Todd Wolynski, Heather Waters Borthwick, David Bilkis and Kim Havlin, and associates Ruben Henriquez, Misha Ross, Michaela Pickus and Livy Mezei in New York; and associates David Grotts and Kevin Kinder in Los Angeles
Cescon, Barrieu, Flesch & Barreto Advogados
Partner Maurício Santos and associate Amanda Arêas in Rio de Janeiro, and partners Daniel Laudisio and Fábio Rosas in São Paulo
DLA Piper (Chile)
Partners Matías Zegers, Rodrigo Alvarez and Mauricio Halpern, and associates Vicente Vergara, María Isabel Izquierdo and Germán Vargas in Santiago
DLA Piper (Peru)
Partner Ricardo Escobar and associates Reyna Silva-Santisteban and Ricardo Mercado in Lima
DLA Piper Martínez Beltrán
Partners Camilo Martínez Beltrán and Nicolas Polania, and associates Sergio Rojas and Ana Sofía Payán in Bogotá
Partner Jesús Beltrán and associates Juan Francisco Simone and Juan Bernardo Guarderas in Quito
Counsel to Knighthead Capital Management
Quinn Emanuel Urquhart & Sullivan LLP
Partners Susheel Kirpalani and Dennis Hranitzky, counsel Debra O'Gorman and associate Victor Noskov in New York
Hogan Lovells LLP
Partners Stacey Rosenberg and David Simonds in Los Angeles
Counsel to Delta Air Lines
Davis Polk & Wardwell LLP
Partners Marshall Huebner, Tim Graulich, Lara Buchwald and Vanessa Jackson in New York
Barros & Errázuriz Abogados
Partners Pablo Guerrero, Carola Trucco, Vicente Cordero, and Javier San Martín and associates Fernanda Becker and José Luis Corvalán in Santiago
Counsel to the creditors
Partners Allan Brilliant and Craig Druehl and counsel David Herman in New York
Counsel to TMF Fiduperu
DLA Piper (Peru)
Partner Sergio Barboza and associate Juan Carlos Ramirez in Lima
Counsel to TMF Brazil
Cescon, Barrieu, Flesch & Barreto Advogados
Partner Fernando Gomes and associate Anita Reis in São Paulo