Bloomberg — Latin America’s largest airline is planning a return to US capital markets after cutting nearly $4 billion of debt during a years-long restructuring.
Latam Airlines Group SA (LTM) will seek to re-list its American depositary receipts on the New York Stock Exchange this year after they were suspended during the bankruptcy, Chief Financial Officer Ramiro Alfonsín said in a video interview. It also expects to return to international bond markets next year, he said.
The Santiago-based carrier, which emerged from Chapter 11 in November, is trying to reduce debt-to-earnings ratios even as it adds routes to its network.
“We have a good opportunity for the market to recognize and better understand the new Latam,” Alfonsín said. “In 2024, it’s likely we’ll start to address the question of refinancing.”
The company, which operates 310 aircraft and has the largest share of at least four South American markets, was one of three big Latin American carriers to restructure in US bankruptcy courts when the Covid-19 pandemic crippled air travel in 2020.
The company has about $6.5 billion in debt, including more than $1 billion in secured notes due in 2027 and 2029 that were issued as private placements during the restructuring. The notes have each returned 15% since issuance, better than the 7.6% average gain for high-yield airlines, according to a Bloomberg index.
Shares, which never stopped trading in Santiago, have lost 19% since the company exited bankruptcy. Its ADRs have been trading over the counter.
Latam set 2023 guidance for Ebitdar — a standard measure of profitability for airlines — at $2 billion to $2.2 billion, close to the figure it reported in 2019, the last full year before the pandemic. Net debt is forecast to fall to around three times Ebitdar from four times at the end of 2022.
Expansion Plans
The company has about $2.3 billion in liquidity after securing cash under a new ownership structure that includes stakes held by US investment firms Sixth Street Partners and Strategic Value Partners and international carriers Delta Airlines and Qatar Airways Group.
Latam plans to fly 38 more routes than it did before the pandemic as demand returns. For international ones, it has joined Delta in a joint business agreement, which is “among the most lucrative and least difficult expansion” strategies, according to Stephen Trent, an analyst at Citigroup Inc. who rates Latam as neutral/high risk.
In domestic markets, Alfonsín said Latam is looking at Colombia after low-cost Viva Air stopped operating last month following a failed attempt to integrate with Avianca Holdings SA, the country’s largest airline.
It also sees opportunities to add to the roughly 37% share it says it holds in Brazil. Competitors Gol Linhas Aereas Inteligentes SA and Azul SA there staved off Chapter 11 during the pandemic but are now working on deals to shore up their finances.
“Some companies had to go through Chapter 11 and restructure, while others tried to weather the storm,” he said. “You’re seeing the consequences of that now.”
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