Hogan Lovells advises Knighthead Capital Management on a debtor-in-possession financing facility to LATAM Airlines

Los Angeles, 16 November 2020 – Global law firm Hogan Lovells served as transactional counsel to Knighthead Capital Management, LLC (“Knighthead”) as lead lender in connection with its proposal, on a competing basis, of a debtor-in-possession (“DIP”) financing facility to LATAM Airlines as an alternative to a facility proposed by certain equity owners in the airline.

On September 10, 2020, Judge James Garrity declined to approve the debtors’ DIP financing proposal on the basis that the “Modified Equity Subscription Election gives rise to improper sub rosa plan treatment of the Tranche C Lenders and the Debtors’ equity holders.”

Knighthead initially proposed a Tranche C DIP Facility of US$900 million, to be provided by certain funds and accounts advised by Knighthead and other holders of LATAM Airlines’ unsecured bonds. This facility was then superseded by a Tranche C DIP Facility to be provided by Jefferies LLC, with respect to which certain Knighthead funds would collectively constitute the largest member of the lending syndicate. After Judge Garrity approved a revised version of the debtors’ DIP financing proposal, the funds and accounts advised by Knighthead agreed to provide a portion of the loans thereunder. Hogan Lovells served as counsel to Knighthead in connection with each of the above DIP facilities.

The Hogan Lovells team was led by Banking partner Stacey Rosenberg and Business Restructuring and Insolvency partner David Simonds, assisted by Business Restructuring and Insolvency Senior Associate Edward McNeilly. All lawyers are based in  the firm’s Los Angeles office.

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