LATAM Amends Treatment of RCF Claims under its Plan

Santiago, Chile – WEBWIRE



LATAM Airlines Group S.A. informs that, in the context of its Chapter 11 reorganization process before the U.S. Bankruptcy Court, it submitted before such Court, an amended Plan of Reorganization (the “Plan”), and entered into an amendment to the Restructuring Support Agreement (the “RSA”) executed in furtherance of the Plan.


The purpose of these amendments to the Plan and the RSA is to modify the treatment afforded to the claims (the “RCF Claims”) related to that certain credit and guaranty agreement dated as of March 29, 2016 (the “RCF Credit Agreement”). Prior versions of the Plan provided that the RCF Claims were unimpaired, and therefore were presumed to accept the Plan (thus it was not necessary to solicit their votes). The foregoing treatment was proposed with the understanding that the RCF Claims would be either refinanced pursuant to a revised RCF Credit Agreement (the “Revised RCF Credit Agreement”), or otherwise under the Plan. No other class of claims under the Plan are impacted by the amendment to the Plan.


Since certain few holders of the RCF Claims and other potential sources of financing are not currently in a position to provide the required funding in the amount and structure that was contemplated under the Revised RCF Credit Agreement, LATAM is required to modify the treatment of the RCF Claims under the Plan in order to provide that the RCF Claims are now impaired under the Plan, and therefore entitled to vote to accept or reject the Plan. The amendment further provides that each holder of the RCF Claims will be entitled to elect between two different treatments depending on whether each holder is willing to provide financing commitments for the Revised RCF Credit Agreement. While holders of the RCF Claims that provide financing commitments will receive Class 1a Treatment, holders of the RCF Claims that do not provide financing commitments, as well as those who make no election, will receive Class 1bTreatment.


Under this construct, the aggregate amount of the Revised RCF Credit Agreement would be U.S.$600 million consisting of a combination of a Tranche A Facility and a Tranche B Facility in a proportion that will be determined depending on elections by holders of the RCF Claims. The Tranche B Facility will be subordinated in right of payment to borrowings under the Tranche A Facility.


The Tranche A Facility will be reserved for holders of the RCF Claims who elect Class 1a Treatment. Such facility would consist on a new revolving facility that will remain undrawn throughout the effective date of the Plan. The Tranche A Facility will have a three-year maturity date and will accrue interests at SOFR + 3% per annum, which will be paid on a monthly, quarterly or semiannual basis. Under the amended Plan, each holder of the RCF Claims that elects Class 1a Treatment would also receive a distribution in cash equal to the outstanding principal amount under the RCF Credit Agreement, plus the respective unpaid interest, fees and expenses comprising the allowed amount of such RCF Claim (to the extent not previously paid by LATAM).


In turn, the Tranche B Facility will be reserved for holders of the RCF Claims who elect Class 1b Treatment, as well as to holders who make no election. Such facility will serve the purpose of refinancing (in the form of take-back debt) the outstanding principal amount of their respective RCF Claims. The Tranche B Facility will have a five-year maturity date and will accrue interests at a fixed rate of 4.25% per annum, which will be paid on a quarterly basis. Under the amended Plan, each holder of the RCF Claims that receives Class 1b Treatment would also receive a distribution in cash equal to any unpaid interest, fees, and expenses comprising the allowed amount of their respective RCF Claims (to the extent not previously paid by LATAM).

LATAM is Positioned as the Airline Group with the Best Performance in Sustainability in America and Europe


  • It obtained fourth place worldwide in measurement, receiving 72 points (out of 100) and placing itself in the top decile of the airline industry. 


  • It should be remembered that the group launched its sustainability strategy earlier this year, setting the goal to eliminate single-use plastics by 2021, be zero-to-waste landfill by 2027 and achieve carbon neutrality by 2050.


LATAM Airlines Group obtained fourth place worldwide in Standard & Poor’s (S&P) Global Corporate Sustainability Assessment (CSA), and has positioned itself as the airline with the best sustainability performance in the American and European continents. According to the most recent results published.


Since 1999, the Corporate Sustainability Assessment and its collaboration with S&P Dow Jones Indices have been used to create the leading global sustainability benchmark. This year, more than 10,000 companies were evaluated in three areas: environmental, social and governance.


“The result obtained is very positive news that encourages and shows us that we are on the right track, but it is not enough. We cannot think of a LATAM in the future that does not go hand-in-hand with the development of our ecosystems and communities. We are working to become the economic, social and environmental outlet that we aspire to be in the countries where we operate,” said Roberto Alvo, CEO at LATAM Airlines Group.


Earlier this year, the group launched its sustainability strategy based on three pillars: Climate Change, Circular Economy and Shared Value, highlighting its commitment to the protection of strategic ecosystems in South America, migration to a zero waste to landfill model, and making its connectivity capacity available for the benefit of the region’s communities. 


The strategy’s lines of action were designed collaboratively with experts and environmental organizations throughout the region and seek to make the group carbon neutral by 2050.


Climate Change: The group will seek to reduce its emissions by incorporating sustainable fuels and new aviation technologies that will be available beginning in 2035. In addition, it will promote a program that will allow passengers, corporate and cargo customers the option of offsetting CO2 emissions associated with their trips by supporting iconic projects in the region. As part of its value proposition, LATAM will match the amount of tons of CO2 offset.


In line with its objective to contribute to the protection and recovery of ecosystems, it recently announced the first conservation project to advance carbon neutrality: CO2BIO. CO2BIO is an initiative that will conserve 200 thousand hectares of flooded savanna, a habitat to more than 2,200 species that has the potential to capture up to 2.8 million tons of CO2 by 2025.


Circular Economy: LATAM is also committed to promoting a culture of elimination, reduction, reusing and recycling throughout its operation in order to become a group that generates zero waste to landfill by 2027. Single-use plastics will be eliminated before 2023 and recycling actions, such as the “Recycle Your Trip’’ program (segregation of waste generated on board such as aluminum, glass and plastic), are currently in place; in addition to a program that recycles uniforms and allows them to be used as raw materials in new products.


Shared Value: The group will expand its capacity to transport cargo and people for health programs, natural disasters and environmental care. This is in line with the Solidarity Plane program, which collaborates with communities through agreements, offering free expertise, infrastructure, connectivity and speed of transportation through passages and cargo transfers. To date, the program has transported more than 165 million vaccines, more than 1 million tons of medical supplies, 3,233 health professionals, and more than 1,800 organs and tissues free of charge since the start of the pandemic.