Cueto, Amaro and Eblen families, along with Qatar, agreed to lower the award they will receive if they exchange debt for shares, something that will now be the company’s decision.
With a few minutes of delay, around 10:15 am, the first of three days of hearing began to define the financing mechanism with which Latam Airlines could face the reorganization process in the United States, where it seeks to collect from the order of the US $ 2,450 million through the denominated Debtor in Possession (DIP).
The company structured the DIP into three sections: A, for financial organizations in general; the B, for state contributions -which have not arrived until the minute-, and the C, for the shareholders.
Within minutes of starting, Latam’s defense – led by the Cleary Gottlieb study in the US – requested an hour-long recess, after two amendments were tabled to their original financing proposals by the company’s shareholders – the Cueto and Amaro families with Qatar- and the Jefferies fund.
This anticipates that the battle for those resources will be strong in the coming days. In section C of the DIP, Latam’s shareholders already have US $ 900 million committed, to which another US $ 250 million could be added. The Jefferies fund, driven by bondholders, involved contributing just $ 900 million.
On the Latam shareholders side, its proposal has two relevant changes. One is that it will be the company – and not them – who will decide whether the payment of these funds is made through the possibility of exchanging shares and, second, that the prize for this option dropped from 32% to 20%.
This had been one of the most questioned points of the proposal, given the advantage that it implied for the holders of shares that contributed resources.
In addition, yesterday by Oaktree – a fund that is willing to invest US $ 1.3 billion in tranche A of the DIP – made it appear that its offer is on the table if tranche C is delivered by long-term shareholders. If it wasn’t them, this could fall.
In the case of Jefferies, he complemented his proposal, officially adding Knighthead Capital Management.
The difference between both offers, in addition to the conditions, is that one could raise US $ 1,150 million (there is a quota of additional US $ 250 million for shareholders of the company) and that of the funds that went out to compete US $ 900 million.
After the break of just over an hour, at 11:21 hours the appointment was resumed, but the parties to the process asked to have a conference off the record (private) with the judge to discuss some points. Given this, Delta asked to know the issues that would be addressed and that the parties involved could be present.
Other participants included: advisors to the Latam Committee of Unsecured Creditors, Oaktree Capital Management, Knighthead Capital Management, the Ad Hoc Group of Bondholders and Delta.
The private phone meeting lasted for about an hour, and after it, the judge ruled that hearings will resume tomorrow. This, starting with another private conference at 9:15 am, to move to an open instance starting at 10:00 am.
The meetings will last until Thursday if necessary, although the judge hinted that if there are too many objections and they are not resolved, they will proceed to take place on Friday.
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