LATAM Airlines Group SA has obtained court approval of a deal with creditors that will guarantee financing for a restructuring proposal despite outcry from junior creditors who oppose hundreds of millions of dollars in fees associated with the transaction, Reuters reported. U.S. Bankruptcy Judge James Garrity in Manhattan approved LATAM's so-called backstop agreement with a creditor group, whereby the creditors will guarantee financing if no one else steps up to provide it. Under the deal, the 15 backstop creditors would receive $734 million in fees to ensure that $5.4 billion in stock and debt offerings are fully financed. The agreement is part of the Chilean airline's larger restructuring plan that calls for it to raise more than $8 billion to pay creditors and exit bankruptcy. LATAM filed for chapter 11 in the U.S. Bankruptcy Court for the Southern District of New York in May 2020 as world travel came to a halt amid the COVID-19 pandemic. Two groups of junior creditors objected to the backstop agreement, including the airline’s official committee of unsecured creditors. The committee argued that the fees that the backstop group would collect are “unreasonably large” and that the airline should have considered less expensive options. Additionally, the committee argued that the deal improperly favors shareholders, including Delta Air Lines Inc, over the junior creditors. The case is In re LATAM Airlines Group SA, U.S. Bankruptcy Court, Southern District of New York, No. 20-11254.
