With $ 17.9 billion in debt and more than 100,000 creditors, Latam filed for bankruptcy protection (chapter 11) on Tuesday, 26, in New York. The company was the second airline in Latin America to request restructuring in the United States amid the covid-19 pandemic crisis, which paralyzed the airline industry worldwide. 15 days ago, Avianca Holdings made the same move. Judicial protection of creditors, however, will not be enough to get through the crisis. Latam is still waiting for help from the governments of the countries where it operates.
“The only thing that is not viable is to think that there will be no government aid. Aid from governments, not only from Brazil, must come, just as it happened in Germany and the USA,” said the president of Latam in Brazil, Jerome Cadier, to the newspaper The State of S. Paulo.
The recovery request does not include the group’s Brazilian unit, precisely because of the possibility of receiving financial assistance from the government.
The Brazilian aid package for airlines, designed by the National Bank for Economic and Social Development (BNDES), provides for a R $ 4 billion bailout to be divided between Latam, Gol and Azul and requires companies to be listed on B3, the São Paulo Stock Exchange. Latam, however, has shares traded in New York and Santiago, Chile.
According to Cadier, conversations with the Jair Bolsonaro government are advancing to arrive at a solution that also serves Latam. “You have the option of finding financing that does not require the company to list itself here and you have other options. We have not yet converged, but we are analyzing the pros and cons of each option.”
One model under analysis is that the BNDES participates in the recovery as a debtor in possession (DIP), a kind of creditor that has payment priority. Latam shareholders, the Chilean family Cueto (parent company, with 21.5% interest) and the Brazilian Amaro (with 2%), in addition to Qatar Airways (owner of 10% of the airline), will grant a loan of up to US $ 900 million in this model so that the company can continue operating while it is in recovery.
Latam believes that the restructuring can help it get a loan in Brazil. In an interview with journalists, the group’s president, Roberto Alvo, stated that “the rehabilitation provides interesting options for BNDES to participate in. The structure that the bank had proposed was complex,” he said.
The reading, however, is different at BNDES and private banks, which also participate in the conversations. The amount that was previously available to the airline should be reduced, with an increase in risk perception, according to industry sources.
Latam also hopes to receive help from the government of Chile, the company’s headquarters. Chilean President Sebastián Piñera was once a major shareholder in the airline and is close to the Cueto family. Financial aid, therefore, could be frowned upon in the country.
On Tuesday, the Chilean Ministry of Finance, however, released a note in which it said it assessed the “convenience and opportunity to contribute to the process of reorganizing Latam”. According to Cadier, talks with the Piñera government “are going on”.
Latam’s shares in Santiago closed on Tuesday with a 36% drop. In New York, shares fell 34.6%. / COLLABORATED ALINE BRONZATI
The information is from the newspaper The State of S. Paulo.
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