Latam Airlines creditors express increasing concern over plan terms

By Sarah Lizee

Olympia, Wash., Oct. 22 – Latam Airlines Group, SA’s official committee of unsecured creditors said its concerns regarding the company’s proposed plan of reorganization terms are continuing to grow, according to a statement filed Thursday with the U.S. Bankruptcy Court for the Southern District of New York.

Last month, the committee filed a statement in response to the debtors’ fourth exclusivity extension request, and said that the illustrative plan term sheet contemplated an exclusive rights offering to existing shareholders, in violation of the absolute priority rule and in contravention of the court’s priori debtor-in-possession financing ruling.

The committee also raised concerns regarding the dynamics of the plan negotiation process and the process for seeking exit capital.

“In the month that has passed since then, the committee’s concerns have only increased,” the group said in its statement.

As previously reported, the company is now seeking a fifth extension of its exclusive periods to file and solicit votes on a Chapter 11 plan.

Specifically, the company asked the court to extend the plan filing period through Nov. 26 from Oct. 15 and the solicitation period through Jan. 26 from Dec. 15.

“No consensual plan has been put forward, and for the first time the debtors appear to acknowledge that, under the current trajectory, ‘filing a plan with the support and participation of their various stakeholders’ may turn out to be ‘not possible.’”

The committee said it remains “deeply concerned” that a further extension of the exclusive plan periods may be used to simply pressure creditors to acceded to a plan that “rewards out-of-the-money shareholders” on account of their equity interests at the expense of unsecured creditors.

Latam is a Santiago, Chile-based airline. The company filed bankruptcy on May 25, 2020 under Chapter 11 case number 20-11254.

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