The carrier now faces a hard sell in convincing other shareholders to shore it up with additional financing.
Latin America’s largest airline LATAM Airlines Group SA said on Tuesday the company and its affiliates in Chile, Peru, Colombia, Ecuador and the U.S. have filed for Chapter 11 bankruptcy protection in the U.S.
LATAM is the latest corporate victim of the coronavirus pandemic that has brought a virtual halt to air travel, joining Colombia’s Avianca Holdings SA and Australia’s Virgin Australia Holdings Ltd in bankruptcy protection as it seeks to restructure its debt.
“We have implemented a series of difficult measures to mitigate the impact of this unprecedented industry disruption, but ultimately this path represents the best option,” LATAM CEO Roberto Alvo said in a statement.
The airline will continue to fly while it is in bankruptcy protection and its affiliates in Argentina, Brazil and Paraguay were not included in the Chapter 11 filing.
U.S. carrier Delta Air Lines Inc is the biggest shareholder in LATAM, having last year paid $1.9 billion for a 20 percent stake during better times for the industry.
LATAM said it had secured funding from other major shareholders, including the Cueto and Amaro families and Qatar Airways, to provide up to $900 million in debtor-in-possession financing.
“To the extent permitted by law, the group would welcome other shareholders interested in participating in this process to provide additional financing,” the airline said, adding it had about $1.3 billion in cash on hand.
LATAM listed assets and liabilities in the range of $10 billion and $50 billion, according to a filing with the U.S. Bankruptcy Court in Southern District of New York. The airline was downgraded by S&P and Fitch on Friday after the company confirmed it did not pay interest and principal on three tranches of 2015 $1 billion enhanced equipment trust certificates.
LATAM, formed when Chile’s LAN merged with Brazil’s TAM in 2012, said its Brazilian affiliates are in discussions with the Brazilian government about the next steps and financial support for operations in the country.
(Reporting by Rama Venkat in Bengaluru and Jamie Freed in Sydney; Editing by Shounak Dasgupta and Kim Coghill)
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Photo credit: LATAM will continue to fly while it is in bankruptcy protection. LATAM