RIO DE JANEIRO, BRAZIL – As expected, Latam Airlines shares crashed on the Santiago Stock Exchange. The airline’s shares plunged 83.9% in the first morning transactions, to finally end with a drop of 45.4% to US$512 per share.
The origin of the plunge lies the reorganization plan filed under Chapter 11 of the U.S. Bankruptcy Law, which the company made on Friday before the Bankruptcy Court of the Southern District of New York.
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According to the proposal, the current shareholders will be diluted to 0.1%, which is why the stock loses so much value in the stock market. In any case, the market indicates that the current value reflects the preferential option that the existing shareholders have to participate in the process.
The communiqué issued last week states that the company and its counterparties agreed to inject US$8.19 billion into the group through a combination of fresh capital, convertible bonds, and debt, which will enable the group to have the appropriate capitalization to execute the business plan.
In the same document, the company detailed: “After exiting the process, Latam is expected to have total debt of approximately US$7.26 billion and liquidity of approximately US$2.67 billion. The group has determined that this is a conservative level of debt and adequate liquidity in a period of continued uncertainty for global aviation and will leave the group in a better position for future operations.”