South American carrier, LATAM Airlines, had filed for bankruptcy protection in USA court last month, with an aim to restructure the $18 billion debt. LATAM became the world’s largest airline to ask for an emergency reorganization in these times where travel and tourism is severely affected due to the coronavirus pandemic.
Latest reports confirm that bondholders of LATAM Airlines are currently in talks to infuse up to $1.5bn in a ‘debtor-in-possession’ (DIP) loan within Chapter 11, proceeding in the United States Court. The precise value of the loan shall be finalized later during formal proceedings, however, it is expected to be around $1-1.5bn.
The carrier stated its shareholders, namely, Qatar Airways and Cueto Group have committed to infuse around $900mn in additional funding. However, LATAM aims to raise around $2.5bn from different sources in order to support operations. The bondholders seeking the DIP loan include Australia’s Macquarie Group, HSBC, Blackrock Inc, and Chile’s Moneda Asset Management, which are currently informally discussing the matter with the investment bank Moelis & Co.
A Debtor-in-possession (DIP) loan is a form of financing which is provided for entities in financial distress, typically during restructuring process under corporate bankruptcy law, such as Chapter 11 under the USA courts. The financing is typically meant to aid struggling entities stay afloat, whilst minimising the threat of their assets being seized by lessors.
Even though staying afloat maybe be difficult in the current afflicting times, we hope LATAM, through the DIP loan, finds a way!
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