Latam Airlines trustee objects to sixth revised joint plan of reorganization

Chicago, May 2 – Latam Airlines Group, SA has had an objection for its sixth revised joint plan of reorganization from U.S. Trustee for Region 2, William K. Harrington, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

The first part of the objection pertains to third-party releases. Harrington notes that the plan “impermissibly” imposes third-party releases on parties who have not demonstrated their consent to such releases.

The trustee notes that the definition of “released parties” is unusually broad and encompasses many creditor groups and equity holders not typically included in the released party definition.

Additionally, Harrington objects to the scope of the injunction and exculpation provisions of the plan in connection with such defenses as recoupment and contribution of creditors who did not have a right to vote on the plan.

The trustee also states that the corporate incentive plan (“a seeming replacement for what was formerly referred to as the ‘Management Incentive Plan’”) fails to comply with section 503(c) of the bankruptcy code.

He cites that there is insufficient information to determine whether the corporate incentive plan payments are reasonable, part of compliance with the bankruptcy code.

Latam Airlines 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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