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LATAM Airlines proposes new $2.45 billion financing deal to U.S. bankruptcy court

FILE PHOTO: A passenger plane arrives during a general quarantine amid the spread of the coronavirus disease (COVID-19), at the Arturo Merino Benitez International Airport, in Santiago, Chile May 26, 2020. REUTERS/Ivan Alvarado

SANTIAGO (Reuters) - LATAM Airlines has presented a new $2.45 billion financing proposal in the middle of its bankruptcy protection process in the United States, replacing a proposed debtor-in-possession loan that prompted the judge to reject the original plan earlier this month.

LATAM, the largest air transport company in Latin America, told the Chilean securities regulator in a letter on Wednesday night that the new debtor-in-possession loan maintained “basically” the structure presented in July.

In one tranche, asset management firm Oaktree Capital Management amended the proportion of the loan it was offering to $1.125 bln from $1.3 billion originally, with a group of creditors put together by investment bank Jefferies Group providing an additional $175 million.

In a second tranche, several key LATAM shareholders, including the Cueto family, which controls the airline, and Qatar Airways, changed their offering from the $900 million convertible loan previously rejected by the judge amid opposition from other creditors to $750 million with $250 million additional financing from creditors led by Jefferies Group and $150 million from other LATAM shareholders or new investors.

LATAM said in its statement that if new investors could not be found, key LATAM shareholders and the Jefferies Group creditors would make up the difference. It also stipulated that both tranches of loans had to be paid in cash, rather than equity as previously in the plan rejected by the judge.

The new proposal offers a loan maturity of 18 months and an annual interest rate of Libor plus 15%. It also requires LATAM to maintain at least $400 million in liquidity.

LATAM filed for bankruptcy protection in May, aiming to reorder $18 billion in debt as it was hammered by the world travel crisis generated by the coronavirus pandemic. At the time, it was the world’s largest airline to file for bankruptcy due to COVID-19.

Reporting by Fabian Cambero and Aislinn Laing; Additional reporting by Carolina Mandl, in Sao Paulo; Editing by Steve Orlofsky and Jonathan Oatis

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