Airline Weekly

Daily Airline News

Latam, Aeromexico Face Allegations of Coercive Tactics in Bankruptcy Restructurings

Edward Russell
January 21st, 2022 at 1:32 PM EST

Photo credit:  Latam Airlines Brasil

Aeromexico and Latam Airlines Group cannot catch a break in their separate, but fraught, U.S. Chapter 11 bankruptcy restructurings. Both airlines face allegations of using coercive tactics, namely offering creditors additional funds or the promise of future business, to garner support for their respective reorganization plans.

A group of Chilean bondholders represented by trustee Banco del Estado de Chile argued on January 20 that Latam offered “patently unreasonable” settlements totaling $2.8 billion to a creditor group known as the Evercore Group in exchange for their support of its plan. The support of the group would effectively nullify the votes of the Chilean bondholders and general unsecured creditors, according to the claim.

Members of the Evercore Group Sajama Investments, a partnership of Sixth Street Partners and Sculptor Capital Management, and SVP, including Poppintree Park LLC and Strategic Value Partners, both objected on January 20 to the Chilean bondholders claims. They called the allegations “theories” and “conjectures.”

The unsecured creditors committee in Aeromexico’s bankruptcy objected for a second time to the airline’s restructuring plan on January 18. The committee claimed that Aeromexico built support for its plan by offering creditors special benefits, the promise of future business, or the threat of a worse outcome if the plan was rejected. The committee alleges that these efforts contributed to nearly two-thirds of the 88 percent of votes in favor of the plan.

In addition, the committee claimed that Aeromexico’s plan unfairly favors “insiders,” namely major shareholder Delta Air Lines and four Mexican shareholders — Eduardo Tricio Haro, Valentin Diez Morodo, Jorge Esteve Recolons, and Antonio Cosio Pando — that control the majority of the airline’s board. The plan would give Delta 20 percent of the airline’s post-bankruptcy shareholdings, and the Mexican shareholders at least 4.1 percent.

Aeromexico said Friday that it “continues working with all of its key stakeholders” to achieve confirmation of its reorganization plan.

The objections are the latest stumbling blocks in Aeromexico and Latam’s fraught restructuring processes. Unlike their competitor Avianca that exited Chapter 11 in December, the airlines have faced challenges building consensus for their plans among creditors. Aeromexico has faced multiple objections from its unsecured creditors, while Latam is subject to an unsolicited takeover offer from Azul that is backed by several of its large creditors.

Aeromexico settled the unsecured creditors’ initial objection, which centered on the post-restructuring valuation of the airline, by agreeing to a one-time cash termination payment upon confirmation.

Latam has as yet fended off Azul’s takeover proposal, which it called “skeletal and incomplete” in a court filing on January 16. However, its own unsecured creditors committee asked the Bankruptcy Court for the Southern District of New York in December to end Latam’s exclusivity period. If granted, Azul and its supporters could officially submit their takeover plan for consideration.

For its part, Latam said in its January 16 filing that requests to Azul for additional details and information related to its proposal were “entirely unanswered.”

Hearings for both the confirmation of Aeromexico’s plan, and on Latam’s disclosure statement — a precursor to a confirmation hearing — are scheduled for January 27.

Updated with Aeromexico’s update Friday that 88 percent of creditors support its restructuring plan.


Already a member?

Already a member?

Up Next

North America

Breeze Sees Softer Bookings as Airline Growth Outpaces Fall Travel Demand

U.S. airlines have scheduled too many flights this fall for the number of travelers, Breeze Airways founder and CEO David Neeleman said. This is pushing down airfares just as fuel…


Hawaiian Airlines Defends Tokyo Haneda Flight Rights as United Seeks to Expand

Hawaiian Airlines plans to resume all of its flights to Tokyo Haneda this winter that were suspended during the pandemic, CEO Peter Ingram said. The move comes as United Airlines…


U.S. Airlines Expect Further Easing of China Flight Limits this Winter

U.S. and Chinese airlines are eager to resume nonstop flights between the two countries following a diplomatic accord in August doubling the number allowed. They have proposed 63 weekly flights…


KLM CEO Rebukes Dutch Proposal to Tax Transit Passengers at Schiphol

KLM CEO Marjan Rintel offered a firm rebuke of a proposal in the Netherlands' legislature to tax transfer passengers at the airline's hub, Amsterdam's Schiphol airport.

Latin America

What Are Mexican Airlines to Do?

Mexico's airlines face two countervailing trends: the reopening of the U.S. to new growth countered by new restrictions at the country's busiest airport, Mexico City International. Edward Russell and Jay…

Exit mobile version