A U.S. bankruptcy judge on Thursday rejected a $2.4 billion financing plan for struggling LATAM Airlines on the grounds that a convertible loan included as part of the package would amount to 'improper' treatment of other shareholders.
FILE PHOTO: Passenger planes parked on a runway are seen during a general quarantine amid the spread of the coronavirus disease , at the Arturo Merino Benitez International Airport, in Santiago, Chile May 26, 2020. REUTERS/Ivan Alvarado
SAO PAULO - A U.S. bankruptcy judge on Thursday rejected a $2.4 billion financing plan for struggling LATAM Airlines on the grounds that a convertible loan included as part of the package would amount to “improper” treatment of other shareholders. The move is a setback for LATAM, which needs short-term liquidity. But in a lengthy court decision, the judge left the door open for the Chilean carrier to introduce a similar financing plan in the future, this time without the possibility of converting part of the loan into equity.The proposal supported by LATAM was composed of a $1.
LATAM presented the bankruptcy financing proposal in July, which prompted a challenge from other creditors, who even assembled a separate funding plan with investment bank Jefferies Group. The key dispute was over the propriety of the convertible loan. LATAM filed for bankruptcy protection in May, 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.
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