LATAM Airlines Group SA announces the exit financing price and advances the date to emerge from the process to early November

LATAM Airlines Group SA (“ LATAM ” or the “ Company ”) informed through an Essential Fact delivered to the Commission for the Financial Market (“ CMF ”), that today the Company, together with Professional Airline Services, Inc.,

A Florida corporation and a wholly owned subsidiary of LATAM, priced an offering (the ” Offering “) of US$450,000,000 for principal of senior secured bonds due 2027 (the ” 2027 Bonds “) with a coupon of 13.375%, at an issue price of 94.423%, and US$700,000,000 for principal of senior secured bonds due 2029 (together with the 2027 Bonds, the ” Bonds“) with a coupon of 13.375% at an issue price of 93.103%. In addition, the Company priced a Term Financing (defined below) of US$1.1 billion with an interest rate at LATAM’s election of ABR+ 8.50% or Adjusted Term SOFR + 9.50% (after exit from Chapter 11 – and before the effective date, ABR + 8.75% or Adjusted Term SOFR + 9.75%).

This represents an important milestone for the Company, and one of the last in its Chapter 11 process. With these new funds, LATAM will have obtained the necessary financing to pay off its currently outstanding debtor-in-possession financing (” DIP Credit “) and it currently contemplates emerging from Chapter 11 of the US Bankruptcy Code (” Chapter 11 “) during the first week of November.

In addition, as the operation is structured, the Term Financing (which represents almost half of the financing) can be repaid at par value as of the third year. The Company has also obtained a new revolving line of credit (“RCF”) in the amount of approximately US$500 million.

“In a very challenging and dynamic context, we are on track to close all of the financing required under the Company’s Reorganization Plan. In the coming weeks, we expect to exit the Chapter 11 process with US$2.2 billion of liquidity and a debt reduction of approximately 35% versus what we had before entering this process,” said LATAM CEO Roberto Alvo.

Last June, the Company informed the CMF about the Chapter 11 exit financing structure, which contemplated the contracting of new debt for up to US$2,250 million, including the Bonds and a Term Financing, in addition to a new line of credit. revolving for an amount of US$500 million (the “DTE Financing”). The Bonds were originally structured as Bridge Loans for a total amount of US$1,500 million committed by various banks.

The Company intends to underwrite and disburse under the bridge credit lines, the revolving credit line and the term financing as follows: (i) the bridge credit lines, on October 12, 2022; and (ii) with respect to the term financing, (i) an initial amount of US$750,000,000 on October 12, 2022; and (ii) the rest of the funds thereunder, of US$350,000,000, on the date of exit from the Chapter 11 proceeding. The financing of the Junior DIP (as defined below), will also be drawn on the 12 October 2022.

In turn, the Bond Offering is expected to close on October 18, 2022.

The Company intends to partially use the proceeds of these financings to repay the current DIP Credit. In addition, the resources of the Term Financing and the Bonds will be used to pay the bridging lines of credit.

The following paragraphs summarize the final structure of DTE Financing:

1. A revolving line of credit ( Exit Revolving Facility ) of US$500 million (the “ Exit Revolving Credit Line ”), which will bear interest, at LATAM’s election, alternatively according to: (i) ABR plus an applicable margin of 3%; or (ii) Adjusted Forward SOFR plus an applicable margin of 4%.
2. A five-year term financing of US$1.1 billion (the “Term Financing”), which will bear interest, at LATAM’s election, alternatively according to: (i) ABR plus an applicable margin of 8.75%; or (ii) Adjusted Term SOFR plus an applicable margin of 9.75% and, after LATAM exits Chapter 11, at LATAM’s election, alternatively to (i) ABR plus an applicable margin of 8.5%; or (ii) Adjusted Term SOFR plus an applicable margin of 9.5%.
3. The Bond Offer: Senior secured bonds due 2027 for a total principal amount of US$450,000,000 with a coupon of 13.375% at an issue price of 94.423%, and senior secured bonds due 2029 for an amount total capital of US$700,000,000 with a coupon of 13.375% at an issue price of 93.103%. The notes will be guaranteed by certain affiliates of the Company and the proceeds of the Notes will be used to partially repay the Bridge Lines of Credit (as defined below). The Offer, whose closing is scheduled for October 18, 2022, is conditional on the closing of the Revolving Credit Line and the Term Financing.
4. A five-year bond bridge loan for a total principal amount of US$750,000,000 maturing in 2027 (the “ 2027 Bond Bridge Credit Line ”).
5. A seven-year bridge line of credit for a total principal amount of $750,000,000 due 2029 (together with the 2027 bridge line of credit, the “Bridge Lines”).

The exit financing also includes a junior debtor-in-possession facility of approximately $1.146 million (the ” Junior DIP Financing “), which will close and remain in effect for the remainder of the Chapter 11 process (i.e., prior to exit). ) and is subordinated in right of payment to DTE Financing. This Junior DIP Financing will accrue interest, at LATAM’s option, alternatively to: (i) ABR plus an applicable margin of 12.5%; or (ii) Term SOFR plus an applicable margin of 13.5%.

The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the ” Securities Act “), or the securities laws of any state or other jurisdiction. As a result, they may not be offered or sold in the United States or to any US person except pursuant to an applicable exemption or in a transaction not subject to the registration requirements of the Securities Act. The Bonds will be offered only to qualified institutional buyers under Rule 144A of the Securities Act and to non-US persons outside the United States under Regulation S of the Securities Act.