DocuSign Envelope ID: E88C811D-4343-4396-B4DB-B54C2F7AB4C2
3 LATAM
HECHO ESENCIAL
LATAM AIRLINES GROUP S.A.
Inscripción Registro de Valores N* 306
Santiago, 11 de octubre de 2021
Señor
Joaquín Cortez Huerta
Presidente
Comisión para el Mercado Financiero
Av. Libertador Bernardo O”Higgins 1449
Santiago
Ref.: Comunica HECHO ESENCIAL
De mi consideración:
De acuerdo a lo establecido en el Artículo 9* y en el inciso
segundo del Artículo 10% de la Ley de Mercado de Valores, y en la Norma de Carácter
General N* 30, debidamente facultado, por medio del presente informo el siguiente HECHO
ESENCIAL de LATAM Airlines Group S.A. (‘LATAN” o la “Sociedad”), inscripción Registro
de Valores N? 306:
Como fuera informado previamente, la Sociedad y algunas de
sus filiales directas e indirectas (en adelante, conjuntamente con LATAM, los “Deudores”)
se encuentran actualmente sujetas a un proceso de reorganización en los Estados Unidos
de América bajo el Capítulo 11 del Título 11 del Código de Estados Unidos, ante el Tribunal
de Quiebras de los Estados Unidos del Distrito Sur de Nueva York (el “Procedimiento
Capítulo 11”).
Como parte del Procedimiento Capítulo 11 y las potenciales
transacciones de reestructuración bajo el mismo de los Deudores y/o de algunas de sus
deudas, la Sociedad celebró acuerdos de confidencialidad (colectivamente, los “NDAs”) con
ciertas contrapartes, en virtud de los cuales la Sociedad acordó divulgar públicamente cierta
información, incluyendo información material no pública (la “Información Revelada”), al
ocurrir ciertos eventos establecidos en los NDAs. En cumplimiento de sus obligaciones en
virtud de algunos de dichos NDAs, la Sociedad proporciona la Información Revelada, como
Anexos 99.1 y 99.2 del presente documento.
DocuSign Envelope ID: E88C811D-4343-4396-B4DB-B54C2F7AB4C2
3 LATAM
Por último, se informa que si bien las conversaciones están en
curso, al 11 de octubre de 2021, la Sociedad no había llegado aún a un acuerdo con
respecto a los términos materiales de una potencial transacción de reestructuración.
Le saluda muy atentamente,
DocuSigned by:
Kolrto (llas
Robefto AIO Me
Gerente General
LATAM Airlines Group S.A.
Agj:
Anexo 99.1 — Propuesta del Grupo de Acreedores Ad Hoc.
Anexo 99.2 —Listado Preliminar LATAM.
PRIVILEGED AND CONFIDENTIAL
SETTLEMENT DISCUSSIONS
SUBJECT TO FRE 408
MOELISGK COMPANY
August 31, 2021
VIA E-MAIL
PJT Partners
280 Park Avenue
New York, NY 10017
Attention: Brent Herlihy
Re: /n re LATAM Airlines Group S.A., et al., No. 20-11254 (JLG) (Bankr. S.D.N.Y.)
(the “Chapter 11 Cases”) — Ad Hoc Group-Sponsored Chapter 11 Plan
Dear Brent:
Further to our continuing discussions regarding exit financing for the debtors in the above referenced
Chapter 11 Cases (the “Debtors” or the “Company”), the ad hoc group of LATAM Creditors (the “Ad
Hoc Group”) is pleased to present, for discussion purposes only, a revised term sheet (the “Revised Ad
Hoc Group Non-Binding Proposal”), attached hereto as Exhibit A. We believe the Revised Ad Hoc
Group Non-Binding Proposal shows the Ad Hoc Group”s continued willingness to work constructively
with the Company toward a successful emergence from chapter 11, and addresses many of the
Company”s concerns noted in its issue list delivered to the Ad Hoc Group on August 25, 2021 (the “Issue
List”). A redline highlighting the amendments made to the Ad Hoc Group Non-Binding Proposal sent to
you in my letter dated August 22, 2021 (the “August 22 Letter”) is attached as Exhibit B.
As noted in my August 22 Letter, the Ad Hoc Group remains eager to engage with the Company to
further develop the Ad Hoc Groups Non-Binding Proposal into a binding commitment; however, the
restricted members of the Ad Hoc Group continue to require responses to certain diligence requests on a
cleansing basis, including the items described in Exhibit C attached hereto, before its offer can become
binding. As Ive noted previously, we believe these information requests are critical to assess the
Debtors” business plan, and are reasonable given the extensive financing requirements of the Company.
The restricted members of the Ad Hoc Group would welcome a call with management to discuss the
importance of these diligence requests further.
We appreciate the opportunity to continue our constructive dialogue regarding our proposal, and we look
forward to hearing from you soon.
Best regards,
CASA
Francesco A. Del Vecchio
Managing Director
T (212) 883-4581 E francesco.delvecchioOmoelis.com
ce:
Tim Coleman
Richard Cooper
Lisa Schweitzer
Zul Jamal
Brian Pfeiffer
John Cunningham
Richard Kebrdle
Exhibit A
Revised Ad Hoc Group Non-Binding Proposal
FINAL
HIGHLY CONFIDENTIAL
SUBJECT TO FRE 408 AND ALL SIMILAR RULES
IN RE LATAM AIRLINES GROUPS.A., ETAL.,
NON-BINDING PLAN OF REORGANIZATION TERM SHEET!
THIS TERM SHEET IS SUBMITTED UNDER RULE 408 OF THE FEDERAL RULES OF EVIDENCE
AND ALL SIMILAR RULES AND OTHER PROVISIONS APPLICABLE TO SETTLEMENT
DISCUSSIONS. IN THAT REGARD, VARIOUS ASPECTS OF THIS TERM SHEET REFLECT AN
EFFORT TO COMPROMISE DISPUTED POSITIONS OF THE PARTIES IN THE DEBTORS”
CHAPTER 11 CASES IN AN EFFORT TO FIND A CONSENSUAL RESOLUTION, AND AS SUCH,
SHOULD NOT BE CONSTRUED AS THE AD HOC GROUP (OR ANY OF THE MEMBERS
THEREOF) TAKING A POSITION ON SUCH DISPUTED POSITIONS, INCLUDING, WITHOUT
LIMITATION, THE TREATMENT OF EXISTING EQUITY HEREUNDER OR THE VALUE OF THE
DEBTORS, ANY OF THE DEBTORS” ASSETS, OR OF ANY RECOVERIES PROVIDED TO
STAKEHOLDERS HEREUNDER. THIS TERM SHEET IS NOT ADMISSIBLE IN ANY
PROCEEDING.
THIS TERM SHEET IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR A
SOLICITATION OF ACCEPTANCES OR REJECTIONS OF A CHAPTER 11 PLAN WITHIN THE
MEANING OF SECTION 1125 OF THE BANKRUPTCY CODE. IN THE EVENT ANY SUCH OFFER
OR SOLICITATION IS MADE IT WILL COMPLY WITH ALL APPLICABLE SECURITIES LAWS
AND/OR PROVISIONS OF THE BANKRUPTCY CODE.
THIS TERM SHEET IS NON-BINDING AND PROVIDED FOR DISCUSSION PURPOSES ONLY. IT
DOES NOT PURPORT TO SUMMARIZE ALL OF THE TERMS, CONDITIONS,
REPRESENTATIONS, WARRANTIES AND OTHER PROVISIONS WITH RESPECT TO THE
TRANSACTIONS DESCRIBED HEREIN, WHICH TRANSACTIONS WILL BE SUBJECT TO,
AMONG OTHER THINGS, THE COMPLETION OF DEFINITIVE DOCUMENTATION AND THE
CLOSING OF ANY TRANSACTION SHALL BE SUBJECT TO THE TERMS AND CONDITIONS SET
FORTH IN SUCH DEFINITIVE DOCUMENTATION. NO BINDING OBLIGATIONS WILL BE
CREATED WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED BY THIS TERM SHEET
UNLESS AND UNTIL BINDING AGREEMENTS ARE EXECUTED AND DELIVERED BY ALL
APPLICABLE PARTIES.
THE TERMS INCLUDED IN THE AD HOC GROUP NON-BINDING PROPOSAL ARE (A) SUBJECT
TO AND CONDITIONED UPON THE SATISFACTORY COMPLETION OF DUE DILIGENCE BY
THE AD HOC GROUP, AND (B) SUBJECT TO CHANGE IN ALL RESPECTS, INCLUDING AS A
RESULT OF ANY FURTHER REVISIONS BY THE COMPANY TO ITS ESTIMATES OF THE CLAIMS
POOL, ITS EXPECTED CASH EXPENDITURES, AND ITS EXPECTED DEBT OBLIGATIONS
GOING FORWARD.
NOTHING IN THIS TERM SHEET SHALL CONSTITUTE OR BE CONSTRUED AS AN ADMISSION
OF ANY FACT OR LIABILITY, A STIPULATION OR A WAIVER, AND EACH STATEMENT
CONTAINED HEREIN IS MADE WITHOUT PREJUDICE, WITH A FULL RESERVATION OF ALL
RIGHTS, REMEDIES, CLAIMS AND DEFENSES OF THE AD HOC GROUP AND BACKSTOP
PARTIES.
! Capitalized terms have the meaning ascribed to them herein.
1
FINAL
HIGHLY CONFIDENTIAL
SUBJECT TO FRE 408 AND ALL SIMILAR RULES
Transaction Overview | This term sheet sets forth the principal terms of a financial restructuring of the
existing debt, and certain other obligations, of LATAM Airlines Group S.A.
(“LATAM Parent”) and its affiliated debtors (together with LATAM Parent,
“LATAM” or the “Debtors”) in the Debtors” jointly administered Chapter 11
cases (the “Chapter 11 Cases”) under title 11 of the United States Code (the
“Bankruptcy Code”) through a chapter 11 plan of reorganization (the “Plan”),
which will be filed by the Debtors in connection with their chapter 11 cases in
the United States Bankruptcy Court for the Southern District of New York
(the “Bankruptcy Court”) and recognized in [Brazil], Chile, and Colombia, as
well as the parallel Cayman joint provisional liquidation proceedings.
This term sheet (the “Ad Hoc Group Non-Binding Proposal”) contemplates a
Plan that relies on a direct equity investment, a rights offering, and new debt
financing in order to (1) make distributions required under the Plan and the
Bankruptcy Code to exit chapter 11, including repayment of the DIP loans,
(ii) to provide recovery to unsecured creditors through the Unsecured
Creditors” Rights Offering, Plan Recovery Reorganized Shares, Unsecured
Debt, and/or cash (as applicable), and (111) to appropriately capitalize the
Debtors upon the effective date of the Plan (the “Effective Date”).
Exit Capital Structure | Upon the occurrence of the Effective Date, LATAM is expected to have the
following capital structure:
Finance and Operating Leases: $4,435mm
Refinanced or Extended RCF: $600mm
Refinanced or Extended Spare Engine Facility: $273mm
Refinanced or Extended Brazil Debt: $300mm
Other Refinanced or Extended Secured Debt: $141mm
Unsecured Debt and New Term Loan: $2,250mm
Cash: $1,750mm
Undrawn Revolver Capacity: $750mm
Exit Debt and Equity | Size
Issuance and Capital
Raise Shares for the aggregate amount of approximately $3,458mm (the
“Reorganized Shares”) will be issued by reorganized LATAM Parent
(“Reorganized LATAM Parent”) at a 5% discount to Plan Equity Value,
where enterprise value is set at $12,500mm (the “Plan Enterprise Value”)?
subject to further dilution by the management incentive program (“MIP”) (the
“Exit Equity Issuance”).* In addition to the Exit Equity Issuance, the
Company will issue $[e]mm of first lien term loans (the “New Term Loan”)
and $[e]mm of unsecured debt (the “Unsecured Debt”), where the sum of the
2 When calculating the reorganized company”s equity value upon emergence, the Ad Hoc Group has taken the
market standard view that all cash on the balance sheet is subtracted from gross debt in order to calculate “net debt,”
and as such is included as distributable equity value inuring to the benefit of owners of Reorganized Shares. Using
that assumption, the Ad Hoc Group Non-Binding Proposal contemplates a plan equity value at emergence equal to
approximately $6,251mm (“Plan Equity Value”).
3 The aggregate amount of Reorganized Shares issued through the Exit Equity Issuance will be increased as needed
to ensure that cash on the balance sheet remains as stated in the Exit Capital Structure.
FINAL
HIGHLY CONFIDENTIAL
SUBJECT TO FRE 408 AND ALL SIMILAR RULES
New Term Loan and Unsecured Debt shall be $2,250mm, and have access to
a new $750mm first lien revolving credit facility (the “New RCF,” and
together with the New Term Loan and the Unsecured Debt, the “Exit Debt
Issuance”).*
As described below, $2,458mm of the Exit Equity Issuance will be subject to
a purchase commitment by the Shareholders and/or the Backstop Parties, and
$1,000mm will be made available to unsecured creditors through a rights
offering (the “Unsecured Creditors” Rights Offering”). Under the Plan,
unsecured creditors will be entitled to receive Unsecured Debt or cash (as
applicable) and/or Reorganized Shares in exchange for their allowed claims
(the “Plan Recovery Reorganized Shares”). Further, Parent Unsecured
Creditors will have the option to subscribe to their pro rata share of the
Unsecured Creditors” Rights Offering.
Backstop
The Exit Equity Issuance will be backstopped by the Backstop Parties
pursuant to the terms below:
+ Backstop Parties: Certain members of the Ad Hoc Group of LATAM
Creditors represented by Moelis £ Company LLC and White £ Case
LLP (the “Ad Hoc Group”)
e Backstop Amount: approximately $3,458mm in Reorganized Shares,
implying [e]% of Reorganized LATAM Parent equity, subject to
dilution from MIP
+ Backstop Duration: 9 months from the date of execution of the RSA
e Backstop Fee: 17.5% of the Backstop Amount, to be paid in
Reorganized Shares
+ Backstop Structure: As described below, the Backstop Parties will be
required to (i) directly subscribe and acquire Reorganized Shares (¡.e.,
the Backstop Parties Direct Investment Rights), and (11) backstop the
Shareholders Investment Rights and Unsecured Creditors” Rights
Offering.
Exit Equity Issuance
Allocation*
Allocations of the Exit Equity Issuance will be as follows:
e Existing shareholders (the “Shareholders”): $500mm (the
“Shareholders Investment Rights”); and
+ Backstop Parties: $1,958mm (the “Backstop Parties Direct
Investment Rights”)
+ Unsecured Creditors” Rights Offering: $1,000mm
4 The Ad Hoc Group understands the Company’s position that leverage should be reduced and liquidity increased.
The Ad Hoc Group cannot move on either term at this time. Further disclosure regarding the Company”s expected
capital expenditures and cash expenses to the Ad Hoc Group”s principals on a cleansing basis would be helpful on
these points (please refer to Exhibit C of the cover letter accompanying this term sheet for additional detail). The
Ad Hoc Group would welcome a further call with management to address these topics.
5 The structure and process through which the rights will be allocated to be agreed by the Debtors and the Backstop
Parties in the Definitive Documentation.
FINAL
HIGHLY CONFIDENTIAL
SUBJECT TO FRE 408 AND ALL SIMILAR RULES
Unsecured Creditors”
Rights Offering
The Debtors will commence a rights offering through which holders of Parent
Unsecured Claims will receive rights to purchase their pro rata share of
$1,000mm of Plan Recovery Reorganized Shares at a 5% discount to Plan
Equity Value.
New Term Loan”
e Amount: $[e]mm
e Pricing and Fees: Market
e Collateral: secured by a first lien on all assets that currently secure
the DIP, and subject to an intercreditor agreement with the New RCF
lenders
New RCF
e Amount: $750mm
e Pricing and Fees: Market
e Collateral: secured by a first lien on all assets that currently secure
the DIP, and subject to an intercreditor agreement with the New Term
Loan lenders
Unsecured Debt
Amount: $[e]mm
Pricing: Subject to agreement by the Debtors and Backstop Parties
Other Terms: TBD
Collateral: [none, unsecured]
Issued to: Either (a) holders of the New York law governed bonds
issued by LATAM Finance Ltd. or (b) third-party debt providers to be
determined
Use of Proceeds
+ Cash to the balance sheet, such that cash balance at closing is equal to
$1,750mm
+ $1,436mm to repay the DIP Tranche A in cash*
+ $1,450mm to repay the DIP Tranche C in cash
+ $300mm to repay administrative claims incurred as part of the
Debtors” chapter 11 cases in cash
+ $125mm to pay certain secured trade and litigation claims
e $778mm to pay certain operating company and priority unsecured
claims
Conditions Precedent
to Restructuring
Effective Date
The following conditions, among others, shall have occurred prior to the
Plan”s Effective Date:
e Orders of the Bankruptcy Court approving the Debtors” entry in the
RSA and the Backstop Agreement, each in form and substance
acceptable to the Backstop Parties, have been entered and become
final and such orders shall not have been reserved, stayed, amended,
modified, dismissed, vacated or reconsidered;
+ The orders approving the Disclosure Statement and confirming the
Plan shall have been entered, each in form and substance acceptable
to the Backstop Parties, and such orders shall not have been reserved,
stayed, amended, modified, dismissed, vacated, or reconsidered;
* Rights offering structure and process to be discussed.
7 Tranche B DIP financing, with the same terms described in the July 21 Commitment Letter delivered by the Ad
Hoc Group, will be funded upon execution of the Definitive Documentation by the Debtors and the Backstop Parties
and approval by the Bankruptcy Court and such Tranche B DIP financing shall be subsequently refinanced by the
New Term Loan upon the occurrence of the Effective Date.
$ For the avoidance of any doubt, LATAM Parent will repay outstanding obligations under both the Tranche A DIP
and Tranche C DIP as the borrower under those facilities.
4
FINAL
HIGHLY CONFIDENTIAL
SUBJECT TO FRE 408 AND ALL SIMILAR RULES
e TheRSA, Backstop Agreement, and Plan shall not have been
terminated and remain in full force and effect, and the parties thereto
shall be in compliance therewith;
e All actions, documents, certificates, and agreements necessary to
implement the Plan shall have been effected or executed and
delivered to the required parties and, to the extent required, filed with
the applicable government units in accordance with applicable law;
e All government and regulatory filings and approvals necessary
implement the Plan shall have been completed or received, as
applicable, including, without limitation, from the Comisión para el
Mercado Financiero, and all waiting periods imposed by any
governmental entity in connection with the transactions contemplated
by the Definitive Documentation shall have terminated or expired;
e The Plan shall have been granted recognition and given full force and
effect or its equivalent status in [Brazil], Chile, Colombia, the
Cayman Islands, and any other jurisdiction identified by the Debtors
with the consent of the Backstop Parties”, and such orders granting
recognition shall have been in form and substance acceptable to the
Backstop Parties;
e the Definitive Documentation (as defined below) shall contain terms
and conditions consistent in all material respects with this Term Sheet
and shall otherwise be satisfactory in form and substance to the
Backstop Parties;
e the Debtors shall have complied, in all material respects, with the
terms of the Plan that are to be performed by the Debtors on or prior
to the Effective Date and the conditions to the occurrence of the
Effective Date set forth in the Plan shall have been satisfied or, with
the prior consent of the Backstop Parties, waived in accordance with
the terms of the Plan; and
e all Covered Expenses shall have been paid in full by the Debtors in
accordance with the RSA and Backstop Agreement.
Each of the foregoing conditions to effectiveness may be waived, in whole or
in part, in writing by the Debtors and/or the Backstop Parties, as applicable.
Treatment of
Creditors!?
Plan treatment as follows:
e Administrative Claims
o Estimated Amount: $300mm
o Treatment: Unimpaired / Repaid in cash
e DIPTranche A
o Estimated Amount: $1,436mm
o Treatment: Unimpaired / Repaid in cash (or such other
treatment as agreed by the DIP Lenders and the Backstop
Parties)
e DIPTranche C
o Estimated Amount: $1,450mm
2 To discuss whether Brazilian recognition and enforcement is necessary.
10 Claims figures based on information provided by the Debtors and is subject to ongoing review.
5
FINAL
HIGHLY CONFIDENTIAL
SUBJECT TO FRE 408 AND ALL SIMILAR RULES
o Treatment: Unimpaired / Repaid in cash (or such other
treatment as agreed by the DIP Lenders and the Backstop
Parties)
e Existing RCF
o Estimated Amount: $600mm
o Treatment: Refinanced or Renegotiated with maturity
extension
+ Spare Engine Facility
o Estimated Amount: $273mm
o Treatment: Refinanced or Renegotiated with maturity
extension
e Brazil Debt
o Estimated Amount: $300mm
o Treatment: Refinanced or Renegotiated with maturity
extension
+ Other Secured Claims
o Estimated Amount: $266mm
o Treatment: Unimpaired / Repaid in Cash or Assumed
e Priority Unsecured Claims
o Estimated Amount: $9mm
o Treatment: Unimpaired / Repaid in Cash
e Operating Company Unsecured Claims
o Estimated Amount: $769mm
o Treatment: Unimpaired / Repaid in Cash or Assumed
+ USD Unsecured Notes
o Estimated Amount: $1,519mm
o Treatment: Impaired / Receive the following:
= On account of such holders” claim against LATAM
Finance Ltd., such holders” pro rata share of
$900mm of either (a) Unsecured Debt or (b) cash
raised from the New Debt Issuance”
= On account of such holders” guarantee claim against
LATAM Parent, Plan Recovery Reorganized Shares
subject to dilution from MIP, based on Plan Equity
Value and allocation of value and the option to
subscribe to their pro rata allocation of the
Unsecured Creditors” Rights Offering
e Parent Unsecured Claims
o Estimated Amount: $[TBD]mm
o Treatment: Impaired / Receive Plan Recovery Reorganized
Shares, subject to dilution from MIP, based on Plan Equity
Value and allocation of value and the option to subscribe to
their pro rata allocation of the Unsecured Creditors” Rights
Offering
e Existing Equity at LATAM Parent
o Treatment: Unimpaired / to remain in place (subject to
dilution)
1! The Definitive Documentation will stipulate intercompany claims held by LATAM Finance Limited and Peuco
Finance Limited shall be deemed valid and Allowed in full.
6
FINAL
HIGHLY CONFIDENTIAL
SUBJECT TO FRE 408 AND ALL SIMILAR RULES
e Existing Equity at other Debtors
o Treatment: Unimpaired / to remain in place
e Intercompany claims
o Estimated Amount: $5,303mm
o Treatment: to be unimpaired, settled or cancelled at the
Debtors” election and subject to consents to be agreed
Definitive
Documentation
The “Definitive Documentation” shall be satisfactory in form and substance
to the Backstop Parties. The Definitive Documentation shall include a
restructuring support agreement (the “RSA””, the Disclosure Statement and
Plan (including all exhibits, schedules, and supplements contained therein),
the order confirming the Plan, the Backstop Agreement (which will include
the terms and conditions of the Unsecured Creditors” Rights Offering), the
Backstop Agreement Approval Order, the RSA Approval Order,
documentation of the Exit Debt Issuance and Exit Equity Issuance, and such
other documentation necessary or appropriate to facilitate the implementation
of the Plan, which in each case shall be satisfactory to the Backstop Parties.
RSA Events of Default
/ Termination Events
The RSA will include customary events of default and termination events,
which shall include events materially adverse to or inconsistent with the terms
of this term sheet and the Definitive Documentation. The RSA will require
that the Debtors meet certain to be determined milestones related to the Plan
process and Effective Date of the Plan.
Governance / Board
Composition Post-
The composition of the Board of Directors on the Effective Date to be
determined.
Emergence
After the Effective Date, shareholders of Reorganized LATAM Parent will
have the right to nominate and elect board members in accordance with and
subject to compliance with the Company?s new organizational documents and
applicable corporate law.
Management Incentive | The Ad Hoc Group recognizes that LATAM”s management team was
Plan (MIP) instrumental in building LATAM into the preeminent airline in Latin
America. The Plan will contain a Board-approved MIP, not to exceed a to be
determined percentage of Reorganized Shares, that reflects management’s
value to the enterprise. The Definitive Documentation will include such MIP,
with details to be agreed with the Backstop Parties as set forth therein.
Releases and
Exculpations
The Plan will include customary releases and exculpation provisions,
including without limitation with respect to the Debtors, DIP lenders and
agents (in their capacity as such), the Backstop Parties, the Shareholders, and
the Ad Hoc Group, and each of their respective affiliates, officers, directors,
advisors and professionals for matters in connection with their acts and
omissions in connection with the Plan, the DIP Facility, the Exit Equity
Issuance, and Exit Debt Issuance.
Taxes
To the extent possible, without compromising the structure and transactions
discussed above, the Plan will be structured and consummated in a
tax-efficient manner.
Equity Listing
Reorganized Shares will be listed on the [Chilean] stock exchange, with
American Depository Receipts listed on the [New York] stock exchange.
FINAL
HIGHLY CONFIDENTIAL
SUBJECT TO FRE 408 AND ALL SIMILAR RULES
Covered Expenses
The RSA and Backstop Agreement shall provide for the payment (or, to the
extent already paid, the reimbursement) of all fees and expenses of the
Backstop Parties and the Ad Hoc Group incurred during the Debtors” chapter
11 cases, including, without limitation, those incurred by White £ Case LLP,
Moelis $ Company, and Bofill Mir £ Álvarez Jana Abogados (the “Covered
Expenses”). The Covered Expenses shall be treated as an administrative
expense of each Debtor”s estate and paid in full and in cash on the Plan
Effective Date.
Break-Up Protections
In consideration of the substantial commitment of capital that will remain in
place for a substantial amount of time given the expected timing of the
Effective Date, the Debtors agree to give the Backstop Parties certain
protections, including the “Break-Up Fee.”
The Break-Up Fee shall mean that, in the event that the Board determines to
pursue an alternative proposal in lieu of the Ad Hoc Group Non-Binding
Proposal, the Debtors shall be obligated to pay a fee in the amount of the sum
of (1) 3% of the Backstop Amount and (2) the Covered Expenses incurred as
of the date that the Board elects to pursue such alternative proposal, to the
Backstop Parties that shall be allocated pro rata to their respective Backstop
Obligations. The obligation to pay the Break-Up Fee shall be approved by
the Bankruptcy Court in the RSA Order and constitute an administrative
expense of the Debtors that must be paid in full and in cash on or before the
effective date of any chapter 11 plan in relation to any such alternative.
Exhibit B
Redline to Ad Hoc Group Non-Binding Proposal
FINAL
HIGHLY CONFIDENTIAL
SUBJECT TO FRE 408 AND ALL SIMILAR RULES
PRIVILEGEDAND-CONFIDENTIAL
AHORNEYWORKPRODUCF
In RE LATAM AIRLINES GROUP S.A., ET AL.,
Non-BINDING PLAN OF REORGANIZATION TERM_SHEET!
THIS TERM SHEET IS SUBMITTED UNDER RULE 408 OF THE FEDERAL RULES OF
EVIDENCE AND ALL SIMILAR RULES AND OTHER PROVISIONS APPLICABLE TO
SETTLEMENT DISCUSSIONS. IN THAT REGARD, VARIOUS ASPECTS OF THIS TERM
SHEET REFLECT AN EFFORT TO COMPROMISE DISPUTED POSITIONS OF THE PARTIES IN
THE DEBTORS” CHAPTER 11 CASES IN AN EFFORT TO FIND A CONSENSUAL
RESOLUTION, AND AS SUCH, SHOULD NOT BE CONSTRUED AS THE AD HOC GROUP (OR
ANY OF THE MEMBERS THEREOF) TAKING A POSITION ON SUCH DISPUTED POSITIONS,
INCLUDING, WITHOUT LIMITATION, THE TREATMENT OF EXISTING EQUITY
HEREUNDER OR THE VALUE OF THE DEBTORS, ANY OF THE DEBTORS?” ASSETS, OR OF
ANY RECOVERIES PROVIDED TO STAKEHOLDERS HEREUNDER. THIS TERM SHEET IS
NOT ADMISSIBLE IN ANY PROCEEDING.
THIS TERM SHEET IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR A SOLICITATION OF
ACCEPTANCES OR REJECTIONS OF A CHAPTER 11 PLAN WITHIN THE M EANING OF SECTION 1125 OF THE
BANKRUPTCY CODE. IN THE EVENT ANY SUCH OFFER OR SOLICITATION IS MADE IT WILL COM PLY WITH
ALL APPLICABLE SECURITIES LAWS AND/OR PROVISIONS OF THE BANKRUPTCY CODE.
THIS TERM SHEET IS NON-BINDING AND PROVIDED FOR DISCUSSION PURPOSES ONLY. IT DOES NOT
PURPORT TO SUMMARIZE ALL OF THE TERMS, CONDITIONS, REPRESENTATIONS, WARRANTIES AND
OTHER PROVISIONS WITH RESPECT TO THE TRANSACTIONS DESCRIBED HEREIN, WHICH TRANSACTIONS
WILL BE SUBJECT TO, AMONG OTHER THINGS, THE COM PLETION OF DEFINITIVE DOCUM ENTATION AND
THE CLOSING OF ANY TRANSACTION SHALL BE SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN
SUCH DEFINITIVE DOCUM ENTATION. NO BINDING OBLIGATIONS WILL BE CREATED WITH RESPECT TO
THE TRANSACTIONS CONTEM PLATED BY THIS TERM SHEET UNLESS AND UNTIL BINDING AGREEM ENTS
ARE EXECUTED AND DELIVERED BY ALL APPLICABLE PARTIES.
THE TERMS INCLUDED IN THE AD HOC GROUP NON-BINDING PROPOSAL ARE (A) SUBJECT TO AND
CONDITIONED UPON THE SATISFACTORY COM PLETION OF DUE DILIGENCE BY THE AD HOC GROUP, AND
(B) SUBJECT TO CHANGE IN ALL RESPECTS, INCLUDING AS A RESULT OF ANY FURTHER REVISIONS BY THE
COMPANY TO ITS ESTIMATES OF THE CLAIMS POOL, ITS EXPECTED CASH EXPENDITURES, AND ITS
EXPECTED DEBT OBLIGATIONS GOING FORWARD.
NOTHING IN THIS TERM SHEET SHALL CONSTITUTE OR BE CONSTRUED AS AN ADMISSION OF ANY FACT
OR LIABILITY, A STIPULATION OR A WAIVER, AND EACH STATEMENT CONTAINED HEREIN IS MADE
WITHOUT PREJUDICE, WITH A FULL RESERVATION OF ALL RIGHTS, REM EDIES, CLAIM S AND DEFENSES OF
THE AD HOC GROUP AND BACKSTOP PARTIES.
1 Capitalized terms have the meaning ascribed to them herein.
1
FINAL
HIGHLY CONFIDENTIAL
SUBJECT TO FRE 408 AND ALL SIMILAR RULES
Transaction Overview
This term sheet sets forth the principal terms of a financial restructuring of
the existing debt, and certain other obligations, of LATAM Airlines Group S.A.
(“LATAM Parent”) and its affiliated debtors (together with LATAM Parent,
“LATAM ” or the “Debtors”) in the Debtors’ jointly administered Chapter 11
cases (the “Chapter 11 Cases”) under title 11 of the United States Code (the
“Bankruptcy Code”) through a chapter 11 plan of reorganization (the “Plan”),
which will be filed by the Debtors in connection with their chapter 11 cases in
the United States Bankruptcy Court for the Southern District of New York
(the “Bankruptcy Court”) and recognized in [Brazil], Chile, and Colombia, as
well as the parallel Cayman joint provisional liquidation proceedings.
This term sheet (the “Ad Hoc Group Non-Binding Proposal”) contemplates a
Plan that relies on a direct equity investment, a rights offering, and new debt
financing in order to (i) make distributions required under the Plan and the
Bankruptcy Code to exit chapter 11, including repayment of the DIP loans, (ii)
to provide recovery to unsecured creditors iathrough the Unsecured
Creditors’ Rights Offering, Plan Recovery Reorganized Shares,
Fake-BaekUnsecured Debt, and/or cash (as applicable), and (iii) to
appropriately capitalize the Debtors upon the effective date of the Plan (the
“Effective Date”).
Exit Capital Structure
Upon the occurrence of the Effective Date, LATAM ¡s expected to have the
following capital structure:
e Finance and Operating Leases: $4,435mm
e Refinanced or Extended RCF: $600mm
e Refinanced or Extended Spare Engine Facility: $273mm
e Refinanced or Extended Brazil Debt: $300mm
e Other Refinanced or Extended Secured Debt: $141mm
e Take-BaekUnsecured Debt and New Term Loan: $2,250mm
e Cash: $1,750mm
e Undrawn Revolver Capacity: $750mm
Exit Debt and Equity
Issuance and Capital
Raise
Size
Shares for the aggregate amount of approximately $3,350mm3,458mm (the
“Reorganized Shares”) will be issued by reorganized LATAM Parent
(“Reorganized LATAM Parent”) at a Lel5% discount? to planPlan Equity Value
where enterprise value efis set at $12,500mm (the “Plan Enterprise Value”)?
subject to further dilution by the management incentive program (“MP”)
2m :
“Discountte- Plan Value-to-be-diseussed.
2 When calculating the reorganized company’s equity value upon emergence, the Ad Hoc Group has taken the
market standard view that all cash on the balance sheet is subtracted from gross debt in order to calculate “net
debt,” and as such is included as distributable equity value inuring to the benefit of owners of Reorganized Shares.
Using that assumption, the Ad Hoc Group Non-Binding Proposal contemplates a plan equity value at emergence
equal to approximately $6.25 1mm (“Plan Equity Value”).
2
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“Ext Equity Issuance” 23.3 In addition to the! Exit Equity Issuance, the Company
will issue $[Glmm of first lien term loans (the “New Term Loan”) and $[Glmm
of take-baekunsecured debt (the “Fake-BackUnsecured Debt”), where the
sum of the New Term Loan and Fake-BaekUnsecured Debt shall be
$2,250mm, and have access to a new $750mm first lien revolving credit
facility (the “New RCF,” and together with the New Term Loan and the
Take-BaekUnsecured Debt, the “Exit Debt Issuance”).*
As described below, approximately $3,350mm2,458mm of the Exit Equity
Issuance will be subject to a purchase commitment by the Shareholders
and/or the Backstop Parties, and $1,000mm will be made available to
unsecured creditors through a rights offering (the “Unsecured Creditors’
Rights Offering”). Under the Plan, unsecured creditors will be entitled to
receive Take-BaekUnsecured Debt or cash (as applicable) and/or
Reorganized Shares in exchange for their allowed claims (the “Plan Recovery
Reorganized Shares”). Further, Parent Unsecured Creditors will have the
option to subscribe to their pro rata share of the Unsecured Creditors’ Rights
Offering.
Backstop
The Exit Equity Issuance will be backstopped by the Backstop Parties
pursuant to the terms below:
e Backstop Parties: Certain members of the Ad Hoc Group of LATAM
Creditors represented by M oelis € Company LLC and White 6: Case
LLP (the “Ad Hoc Group”)
+ Backstop Amount: approximately $3,350m9m3,458mm in Reorganized
Shares, implying[l% of Reorganized LATAM Parent equity, subject
to dilution from M IP
e Backstop Duration: 9 months from the date of execution of the RSA
e Backstop Fee: 17.5% of the Backstop Amount, to be paid in
Reorganized Shares*
e Backstop Structure: As described below, the Backstop Parties will be
required to (i) directly subscribe and acquire Reorganized Shares
(i.e., the Backstop Parties Direct Investment Rights), and (ii) backstop
the Shareholders Investment Rights and Unsecured Creditors’ Rights
3 The aggregate amount of Reorganized Shares issued through the Exit Equity Issuance will be increased as
needed to ensure that cash on the balance sheet remains as stated in the Exit Capital Structure.
* The Ad Hoc Group understands the Company’s position that leverage should be reduced and liquidity increased.
The Ad Hoc Group cannot move on either term at this time. Further disclosure regarding the Companys
expected capital expenditures and cash expenses to the Ad Hoc Group”s principals on a cleansing basis would be
detail). The Ad Hoc Group would welcome a further call with management to address these topics.
*Backstop fee-to be diseussed-
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SUBJECT TO FRE 408 AND ALL SIMILAR RULES
Offering.
DirectHavestment
RightsExit Equity
Issuance Allocation3
Allocations of the Exit Equity Issuance will be as follows:
Existing shareholders (the “Shareholders”): $500mm (the
“Shareholders Investment Rights”); and
Backstop Parties: Approximately$2,850mm1,958mm (the “Backstop
Parties Direct Investment Rights”)
Unsecured Creditors’ Rights Offering: $1,000mm
Unsecured Creditors”
The Debtors will commence a rights offering through which holders of Parent
Rights Offering
Unsecured Claims will receive rights to purchase their pro rata share of
$1,000mm of Plan Recovery Reorganized Shares at a 5% discount to Plan
Equity Value.*
New Term Loan*?
Amount: $[Glmm
Pricing and Fees: M arket
Collateral: secured by a first lien on all assets that currently secure
the DIP, and subject to an intercreditor agreement with the New RCF
lenders
New RCF
Amount: $750mm
Pricing and Fees: M arket
Collateral: secured by a first lien on all assets that currently secure
the DIP, and subject to an intercreditor agreement with the New
Term Loan lenders
Fake-BaekUnsecured
Debt
Amount: $[Glmm
Pricing: Subject to agreement by the Debtors and Backstop Parties
Other Terms: TBD
Collateral: [none, unsecured]
Issued to: Either (a) holders of the New York law governed bonds
issued by LATAM Finance Ltd. or (b) third-party debt providers to the
extentthatterms-obtained by-the-Debtorsin-the-marleetare superior
to-the-terms-ofthe Fake-BackDebtbe determined
Use of Proceeds
Cash to the balance sheet, such that cash balance at closing is equal
to $1,750mm
$1,436mm to repay the DIP Tranche A in cash??
5 The structure and process through which the rights will be allocated to be agreed by the Debtors and the
Backstop Parties in the Definitive Documentation.
S Rights offering structure and process to be discussed.
4 Tranche B DIP financing, with the same terms described in the July 21 Commitment Letter delivered by the Ad
Hoc Group, will be funded upon execution of the Definitive Documentation by the Debtors and the Backstop
Parties and approval by the Bankruptcy Court and such Tranche B DIP financing shall be subsequently refinanced
by the New Term Loan upon the occurrence of the Effective Date.
*8 For the avoidance of any doubt, LATAM Parent will repay outstanding obligations under both the Tranche A
DIP and Tranche C DIP as the borrower under those facilities.
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$1,450mm to repay the DIP Tranche C in cash
$300mm to repay administrative claims incurred as part of the
Debtors’ chapter 11 cases in cash
$125mm to pay certain secured trade and litigation claims
$778mm to pay certain operating company and priority unsecured
claims
Conditions Precedent
to Restructuring
Effective Date
The following conditions, among others, shall have occurred prior to the
Plan’s Effective Date:
Orders of the Bankruptcy Court approving the Debtors’ entry in the
RSA and the Backstop Agreement, each in form and substance
acceptable to the Backstop Parties, have been entered and become
final and such orders shall not have been reserved, stayed, amended,
modified, dismissed, vacated or reconsidered;
The orders approving the Disclosure Statement and confirming the
Plan shall have been entered, each in form and substance acceptable
to the Backstop Parties, and such orders shall not have been
reserved, stayed, amended, modified, dismissed, vacated, or
reconsidered;
The RSA, Backstop Agreement, and Plan shall not have been
terminated and remain in full force and effect, and the parties
thereto shall be in compliance therewith;
All actions, documents, certificates, and agreements necessary to
implement the Plan shall have been effected or executed and
delivered to the required parties and, to the extent required, filed
with the applicable government units in accordance with applicable
law;
All government and regulatory filings and approvals necessary
implement the Plan shall have been completed or received, as
applicable, including, without limitation, from the Comisión para el
Mercado Financiero, and all waiting periods imposed by any
governmental entity in connection with the transactions
contemplated by the Definitive Documentation shall have
terminated or expired;
The Plan shall have been granted recognition and given full force and
effect or its equivalent status in [Brazil], Chile, Colombia, the Cayman
Islands, and any other jurisdiction identified by the Debtors with the
consent of the Backstop Parties*?, and such orders granting
recognition shall have been in form and substance acceptable to the
Backstop Parties;
the Definitive Documentation (as defined below) shall contain terms
and conditions consistent in all material respects with this Term
Sheet and shall otherwise be satisfactory in form and substance to
the Backstop Parties;
$ To discuss whether Brazilian recognition and enforcement is necessary.
5
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+ the Debtors shall have complied, in all material respects, with the
terms of the Plan that are to be performed by the Debtors on or prior
to the Effective Date and the conditions to the occurrence of the
Effective Date set forth in the Plan shall have been satisfied or, with
the prior consent of the Backstop Parties, waived in accordance with
the terms of the Plan; and
e all Covered Expenses shall have been paid in full by the Debtors in
accordance with the RSA and Backstop Agreement.
Each of the foregoing conditions to effectiveness may be waived, in whole or
in part, in writing by the Debtors and/or the Backstop Parties, as applicable.
Treatment of Plan treatment as follows:
Creditors*%
e Administrative Claims
o Estimated Amount: $300mm
o Treatment: Unimpaired / Repaid in cash
e DiPTrancheA
o Estimated Amount: $1,436mm
o Treatment: Unimpaired / Repaid in cash (or such other
treatment as agreed by the DIP Lenders and the Backstop
Parties)
e DiPTranche €
o Estimated Amount: $1,450mm
o Treatment: Unimpaired / Repaid in cash (or such other
treatment as agreed by the DIP Lenders and the Backstop
Parties)
e Existing RCF
o Estimated Amount: $600mm
o Treatment: Refinanced or Renegotiated with maturity
extension
+ Spare Engine Facility
o Estimated Amount: $273mm
o Treatment: Refinanced or Renegotiated with maturity
extension
e Brazil Debt
o Estimated Amount: $300mm
o Treatment: Refinanced or Renegotiated with maturity
extension
e Other Secured Claims
o Estimated Amount: $266mm
o Treatment: Unimpaired / Repaid in Cash or Assumed
e Priority Unsecured Claims
o Estimated Amount: $9mm
o Treatment: Unimpaired / Repaid in Cash
210 Claims figures based on information provided by the Debtors and is subject to ongoing review.
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+ Operating Company Unsecured Claims
o Estimated Amount: $769mm
o Treatment: Unimpaired / Repaid in Cash or Assumed
+ USDUnsecured Notes
o Estimated Amount: $1,519mm
o Treatment: Impaired / Receive the following:
On account of such holders’ claim against LATAM
Finance Ltd., (1)-eitherta)such holders’ pro rata
share of Fake-Baek$900mm of either (a) Unsecured
Debt or (b) sueh-holder’spre+atashare-etcash
raised from the issuance-ofthe Fake-BackDebt fa
third party providers-terms-are superior New Debt
Issuance!!
On account of such holders’ guarantee claim against
LATAM Parent, Plan Recovery Reorganized Shares
subject to dilution from MIP, based on Plan Equity
Value and allocation of value and the option to
subscribe to their pro rata allocation of the
Unsecured Creditors’ Rights Offering
e Parent Unsecured Claims
o Estimated Amount: $[TBD]mm
o Treatment: Impaired / Receive Plan Recovery Reorganized
Shares, subject to dilution from M IP, based on Plan Equity
Value and allocation of value and the option to subscribe to
their pro rata allocation of the Unsecured Creditors’ Rights
Offering
e Existing Equity at LATAM Parent
o Treatment: Unimpaired / to remain in place (subject to
dilution)
e Existing Equity at other Debtors
o Treatment: Unimpaired / to remain in place
e Intercompany claims
o Estimated Amount: $5,303mm
o Treatment: to be unimpaired, settled or cancelled at the
Debtors’ election and subject to consents to be agreed
Definitive
Documentation
The “Definitive Documentation” shall be satisfactory in form and substance
to the Backstop Parties. The Definitive Documentation shall include a
restructuring support agreement (the “RSA”), the Disclosure Statement and
Plan (including all exhibits, schedules, and supplements contained therein),
the order confirming the Plan, the Backstop Agreement (which will include
1! The Definitive Documentation will stipulate intercompany claims held by LATAM Finance Limited and Peuco
Finance Limited shall be deemed valid and Allowed in full.
1
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the terms and conditions of the Unsecured Creditors’ Rights Offering), the
Backstop Agreement Approval Order, the RSA Approval Order,
documentation of the Exit Debt Issuance and Exit Equity Issuance, and such
other documentation necessary or appropriate to facilitate the
implementation of the Plan, which in each case shall be satisfactory to the
Backstop Parties.
RSA Events of Default /
Termination Events
The RSA will include customary events of default and termination events,
which shall include events materially adverse to or inconsistent with the
terms of this term sheet and the Definitive Documentation. The RSA will
require that the Debtors meet certain to be determined milestones related
to the Plan process and Effective Date of the Plan.
Governance / Board
Composition
Post-Emergence
The composition of the Board of Directors on the Effective Date to be
determined.
After the Effective Date, shareholders of Reorganized LATAM Parent will
have the right to nominate and elect board members in accordance with and
subject to compliance with the Company’s new organizational documents
and applicable corporate law.
Management
Incentive Plan (M IP)
The Ad Hoc Group recognizes that LATAM ‘s management team was
instrumental in building LATAM into the preeminent airline in Latin America.
The Plan will contain a Board-approved, eustemary- MIP, not to exceed ato
be determined percentage of Reorganized Shares, that reflects
management’s value to the enterprise. The Definitive Documentation will
include such MIP, with details to be agreed with the Backstop Parties as set
forth therein.
Releases and
Exculpations
The Plan will include customary releases and exculpation provisions,
including without limitation with respect to the Debtors, DIP lenders and
agents (in their capacity as such), the Backstop Parties, the Shareholders, and
the Ad Hoc Group, and each of their respective affiliates, officers, directors,
advisors and professionals for matters in connection with their acts and
omissions in connection with the Plan, the DIP Facility, the Exit Equity
Issuance, and Exit Debt Issuance.
Taxes To the extent possible, without compromising the structure and transactions
discussed above, the Plan will be structured and consummated in a
tax-efficient manner.
Equity Listing Reorganized Shares will be listed on the [Chilean] stock exchange, with
American Depository Receipts listed on the [New York] stock exchange.
Covered Expenses
The RSA and Backstop Agreement shall provide for the payment (or, to the
extent already paid, the reimbursement) of all fees and expenses of the
Backstop Parties and the Ad Hoc Group incurred during the Debtors’ chapter
11 cases, including, without limitation, those incurred by White € Case LLP,
Moelis €: Company, and Bofill Mir $: Álvarez Jana Abogados (the “Covered
Expenses”). The Covered Expenses shall be treated as an administrative
expense of each Debtor’s estate and paid in full and in cash on the Plan
Effective Date.
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Break-Up Protections
In consideration of the substantial commitment of capital that will remain in
place for a substantial amount of time given the expected timing of the
Effective Date, the Debtors agree to give the Backstop Parties certain
protections, including the “Break-Up Fee.”
The Break-Up Fee shall mean that, in the event that the Board determines to
pursue an alternative proposal in lieu of the Ad Hoc Group Non-Binding
Proposal, the Debtors shall be obligated to pay a fee in the amount of the
sum of (1) 3% of the Backstop Amount and (2) the Covered Expenses
incurred as of the date that the Board elects to pursue such alternative
proposal, to the Backstop Parties that shall be allocated pro rata to their
respective Backstop Obligations. The obligation to pay the Break-Up Fee
shall be approved by the Bankruptcy Court in the RSA Order and constitute
an administrative expense of the Debtors that must be paid in full and in cash
on or before the effective date of any chapter 11 plan in relation to any such
alternative.
Summary report:
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10.
Exhibit C
Requested Disclosures to be Cleansed
The forecasted balance sheet for each year-end in the business plan forecast period
Breakdown of financing cash outflows, as provided to advisors in the long-form business plan
and corresponding model, including interest expense and debt amortizations for funded debt,
operating lease liabilities and financial lease liabilities, PBH payments, as well as scheduled
debt maturities
A general range of the average cost of debt for the negotiated financing leases
The Company”s total estimated aircraft rental expense (including PBH) per annum during the
forecast period
The buildup of estimated fleet claim quantum as provided to advisors
A detailed breakdown of 2H 2021 cash burn as described in the prior management presentation
with the Principals and as provided to advisors
An overview of the impact to cash flows, CapEx and EBITDA from the amended schedule of
aircraft deliveries, as provided to advisors
An overview of how the near-term plan changed, if at all, following Q2 2021 results
Further discussions with management and debtor advisors regarding the ability to keep certain
OpCo unsecured claims on balance sheet post-emergence
Disclosure of the “Aircraft Rentals” expense line item, as provided to advisors in the long-
form business plan and as discussed on calls with management
08/25/21
HIGHLY CONFIDENTIAL
SUBJECT TO FRE 408 AND ALL SIMILAR RULES
IN RE LATAM AIRLINES GROUPS.A., ET AL.,
PRELIMINARY ISSUES LIST (AD HOC GROUP OF LATAM CREDITORS 8/22 PROPOSAL)
THIS LIST INCLUDES ONLY CERTAIN MATERIAL COMMERCIAL ISSUES AND DOES NOT
PURPORT TO SUMMARIZE ALL ISSUES — ADDITIONAL ISSUES RELATED TO THE PROPOSAL
MAY ALSO EXIST.
LATAM Airlines Group S.A. requests that the Ad Hoc Group of LATAM Creditors, advised by
Moelis and White and Case, submits an updated proposal addressing the below issues by August 31,
2021 at 5:00pm New York Time.
Capital Structure
e Current proposal contemplates too much leverage at exit and throughout the business plan period
(3.9x LTM gross leverage as of 12/31/2024)
Liquidity
e Insufficient liquidity: LATAM would dip below targeted minimum liquidity (the greater of $1.5bn
and 20% of revenues) throughout the projection period
e No liquidity source to pay post-petition interest if and as it may be required
Uncertainty around Economics
e Theproposal leaves open most of the key financing and backstop terms, making it difficult to assess
the true cost of this proposal
Stakeholder Participation
e Restricting participation in the direct equity instrument to only backstop parties may lead to
objections by similarly situated claimholders that are not eligible to participate under this proposal
Chilean Law
e There exist a number of issues surrounding shareholders” rights under Chilean corporate law
Management Incentive Plan
e Language around MIP does not provide necessary and customary detail
Valuation/Recoveries
e Provide for more robust recoveries to unsecured creditors and shareholders
Blowout Materials
e The proposal purports to demand the cleansing of certain competitively sensitive materials
Link al archivo en CMFChile: https://www.cmfchile.cl/sitio/aplic/serdoc/ver_sgd.php?s567=47bf8bc15a4eb16b91707d0a4fad32a7VFdwQmVVMVVSWGROUkZGNFRXcEZNMDFSUFQwPQ==&secuencia=-1&t=1682376108
