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April 11, 2023

Kramer Levin Represents Diverse Creditor Group Whose Backstop Commitment Served as the Cornerstone to Novel $8 Billion New-Money Raise

Kramer Levin successfully represented an ad hoc creditor group in the Chapter 11 cases of LATAM Airlines Group S.A. and its affiliated debtors (together, LATAM). LATAM, Latin America’s largest air carrier, entered Chapter 11 in the summer of 2020 with over $16 billion in liabilities. Prior to the filing, LATAM employed approximately 42,000 people worldwide, operated 1,400 flights per day and transported 74 million passengers per year to 145 different destinations in twenty-six countries. 

Following the filing in the U.S. Bankruptcy Court for the Southern District of New York, Kramer Levin counseled the ad hoc group in connection with the negotiation and confirmation of a Chapter 11 plan under which LATAM reorganized its complex capital structure and emerged as a stronger and more streamlined global enterprise.

The foundation of the plan was an $8 billion new-money raise, $3.7 billion of which was backstopped by the members of the ad hoc group. The interplay of Chilean corporate law, which grants existing shareholders certain preemptive rights, with the U.S. Bankruptcy Code demanded innovative solutions on both the legal and commercial fronts. Kramer Levin worked with the ad hoc group to ensure parties coalesced around a plan framework that complied with Chilean law and satisfied the parties’ commercial interests.

Kramer Levin guided the ad hoc group, which held claims with an original face value in excess of $5 billion across LATAM’s capital structure, through all phases of LATAM’s Chapter 11 cases. This included negotiating and executing several debtor-in-possession financings, negotiating a Chapter 11 plan that respected both U.S. and Chilean law, developing the terms by which parties would agree to backstop LATAM’s new-money raise in connection with its Chapter 11 plan, and defending the backstop and the plan before the bankruptcy court and on appeal. These appeals included successfully defending the Chapter 11 plan before the District Court for the Southern District of New York as well as the Court of Appeals for the Second Circuit. The Second Circuit confirmed that creditors of an insolvent debtor are not entitled to receive post-petition interest on their claims.

Kramer Levin likewise advised certain of the members of the ad hoc group in their capacity as lenders in connection with structuring and documenting LATAM’s approximately $2 billion debtor-in-possession financing.

LATAM emerged from bankruptcy on Nov. 3, 2022. LATAM shed approximately $3.6 billion of debt from its balance sheet through the Chapter 11 process and emerged with over $2.2 billion of liquidity.

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