LATAM airlines closes renegotiation of US$1.15 billion in debt, says source
On October 11, Latam airlines managed to close the negotiation of part of its debt with creditors, an operation that is part of the plan to exit its Judicial Recovery in the United States.
According to a source that follows the operation, after an intense negotiation involving increased rates of return and reduction of the portion of the value to be renegotiated, Latam agreed to exchange US$1.15 billion in ‘debtor in possession’ (DIP) for US$450 million in five-year bonds, paying a rate of 15% per year, plus a “term loan”, a seven-year loan of US$700 million.
The total amount of the rollover was at least US$100 million below what the company intended to do at this point, a difference that should be covered by the firm guarantee from the banks that coordinated the operation.
The DIP that is being exchanged matures on October 14. It is an instrument used by companies with solvency problems, giving the creditor that agrees to inject resources under these conditions priority in receiving them.
To get out of Judicial Recovery, or Chapter 11, as it is called in the United States, the company needs to replace this debt with other more liquid mechanisms, such as bonds or term loans.
There is the possibility that investors that do not hold the DIP can buy the bond if there is demand. But in this operation, the company faced difficulties.
Valor Econômico heard from distressed credit managers to whom the bonds were offered, who refused to participate in the operation.
According to these interlocutors, there is a lot of resistance to risk in the airline industry, in general, and particularly in Latam.
When the negotiation for this rollover began two weeks ago, the company’s proposal to investors was to raise US$750 million through bonds and pay a rate of 13% with 13.75%.
Another US$750 million would be raised through the issuance of a term loan.
After some attempts to adjust volumes and rates, the company concluded the operation this morning.
The difference in the interest rate paid should be absorbed by the banks that coordinated the operation – Goldman Sachs, J.P. Morgan, Barclays, BNP Paribas, and Natixis.
According to the source heard by Valor, this loss should be around US$10 million.
With information from Valor Econômico
Live Company IntelligenceLATAM airlines closes renegotiation of US$1.15 billion in debt, says source — the full investor dossier
LATAM Airlines Group S.A., together with its subsidiaries, provides passenger and cargo air transportation services in Chile, Argentina, Peru, Colombia, Ecuador, Brazil, the United States, other Latin American countries, the Caribbean, Europe, and Oceania. As of December 31, 2024, the company provides passenger transport services to…
Net income rose to $1.5 bn in 2025, from $581.8 mn in 2023.
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