Latam Airlines Group SA’s bankruptcy-exit plan has divided the airline’s creditors, some of which said a proposed $5.44 billion equity sale would drive too much value to shareholders and other capital providers, WSJ Pro Bankruptcy reported. Latam’s restructuring plan, filed last week, revolves around an equity-capital raise from certain unsecured creditors and a majority of current shareholders, including Delta Air Lines Inc., Qatar Airways Group Q.C.S.C. and the Cueto family. Unsecured creditors that aren’t signed up for the equity raise said in a court hearing Tuesday that Latam allocated too much value to the big creditors and shareholders making capital contributions, leaving too little for those on the outside. The stock-buying program would put Latam’s largest creditor group in control of the business, while retaining stakes for its existing shareholders, despite the bankruptcy. “General creditors who are not members of that group get unreasonably low recoveries,” said Allan Brilliant, a lawyer for the official committee of Latam’s unsecured creditors. The terms of the financing deal aren’t yet up for approval in the U.S. Bankruptcy Court in New York, where Latam sought chapter 11 protection in the early months of the COVID-19 pandemic. But lawyers for nonparticipating creditors took the opportunity yesterday to preview possible arguments against the proposed restructuring, which is subject to continuing negotiations and could change.
