LATAM Airlines engages Cleary Gottlieb for restructuring

LATAM Airlines Group and its affiliates in Chile, Peru, Colombia, Ecuador, and the US have engaged law firm Cleary Gottlieb Steen & Hamilton as the airline proceeds with its voluntary reorganisation and restructuring of its debt under Chapter 11 protection in the US.

LATAM Airlines and its affiliates in Chile, Peru, Colombia, Ecuador and the US filed for Chapter 11 voluntary protection earlier this month, but the airline’s affiliates in Argentina, Brazil and Paraguay are not included in the filing.

The airline is the second in Latin America after Colombia’s Avianca to declare insolvency as a result of the slump in demand for flights amid the COVID-19 pandemic.

“LATAM entered the COVID-19 pandemic as a healthy and profitable airline group, yet exceptional circumstances have led to a collapse in global demand and has not only brought aviation to a virtual standstill, but it has also changed the industry for the foreseeable future,” Roberto Alvo, LATAM’s CEO, said. 

“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 to lay the right foundation for the future of our airline group. We are looking ahead to a post-COVID-19 future and are focused on transforming our group to adapt to a new and evolving way of flying, with the health and safety of our passengers and employees being paramount.”

Since the filing, LATAM has secured financial support from two of the group’s largest shareholders, Costa Verde Aeronautica, the holding company of the Cueto family, and Qatar Airways, which have agreed to provide up to $900 million in debtor-in-possession financing.

“Under the Chapter 11 financial reorganisation process, LATAM and its affiliates will have the opportunity to resize their operations to the new demand environment, given the effects of COVID-19, and reorganise their balance sheets,” Cleary Gottlieb says.

The group will continue passenger and cargo operations as conditions permit throughout the process.

LATAM is Latin America’s leading airline group, with one of the largest route networks in the world.

Cleary Gottlieb had previously advised LATAM in September 2019 in its strategic partnership with Delta. As part of the agreement, Delta acquired a 20 per cent stake in LATAM for $1.9 billion.