ILAP reaches agreement in principle with noteholders on restructuring

By Marisa Wong

Los Angeles, Sept. 26 – Chile’s Inversiones Latin America Power Ltda. (ILAP) announced an agreement in principle with noteholders to restructure its balance sheet.

This agreement will reduce senior secured debt by about $160 million, as well as decrease cash interest expense, both of which will provide the company with additional liquidity and operating flexibility, according to a press release.

Chief executive officer Esteban Moraga said, “We have made significant progress with our noteholders on a potential structure that will allow the company to reprofile its financial obligations together with ensuring that our noteholders are able to obtain positive returns on their investment.

“We have engaged in a constructive discussion with our creditors that we expect will result in a landmark transaction for its creativity and value-adding features. We deeply appreciate the unwavering support from our stakeholders as we collaboratively work towards a structural solution that will provide the essential liquidity required to navigate the current market challenges facing our projects.”

In connection with these initiatives, ILAP entered into confidentiality agreements with some holders of the outstanding principal amount of its 5 1/8% senior secured notes due 2033 issued under the indenture dated June 15, 2021. Those holders represent in aggregate over 80% of the outstanding principal amount of the notes. Under the confidentiality agreements, ILAP provided the holders with access to some confidential information, including certain material non-public information.

Under the confidentiality agreements, ILAP has agreed to disclose the disclosure materials publicly, as well as a preliminary term sheet outlining an agreement in principle on a potential restructuring transaction with the holders. The confidentiality agreements and the term sheet have been published on the company’s website under its investor relations section (https://latampower.com/web/ilapcl-investors/).

In addition, the company and the holders have agreed to an extension of the standstill and forbearance agreement with the holders until Oct. 6 under the same terms. With this, the holders have extended the agreement not to exercise any enforcement rights, or otherwise take remedial actions, under the indenture and related security documents in respect of certain events of default that may arise under the indenture as a result of ILAP not making some payments which fell due on July 3.

Restructuring proposal

ILAP outlined a proposal to exchange existing notes into two instruments: take-back senior secured notes and unsecured convertible notes.

The company is proposing to exchange the existing notes on a pro rata basis for $249 million of take-back notes and $152 million of convertibles.

The convertibles would convert mandatorily into 90% of the equity of the company upon a conversion event.

The company said that while no definitive agreement has been reached with respect to a potential restructuring transaction, the company and the holders will continue to negotiate in good faith with the goal of obtaining a fully executed definitive restructuring support agreement and related documents, in terms consistent with those included in the term sheet.

Lazard Freres & Co. LLC is acting as financial adviser, Greenberg Traurig, LLP as U.S. legal adviser, and Barros, Silva Varela & Vigil Abogados Ltda. as Chilean legal adviser.

The holders have engaged Rothschild & Co. as financial adviser, Cleary Gottlieb Steen & Hamilton as U.S. legal adviser and Claro & Cia. as Chilean legal adviser.

The energy company is based in Santiago, Chile.

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