Latam bondholders losing 80% cry foul over those who’ll get par

Local creditors of Latam Airlines Group are up in arms over a bankruptcy plan that would leave them with next to nothing even as holders of overseas bonds get almost all their money back. BancoEstado SA, a Santiago-based bank acting on behalf of local noteholders, has asked Latin America’s largest airline to improve its terms. The investors are threatening to sue if their demands aren’t meant, and contend that as a Chilean company, Latam should have filed for protection in local courts -- instead of New York -- that would have treated domestic creditors better. It’s easy to see why they’re mad. Local bonds have plunged since the airline’s latest plan to exit bankruptcy was filed in November, with inflation-linked notes due in 2029 trading at 10 cents, according to extrapolated prices calculated by data provider LVA Indices. Overseas bonds, meanwhile, have been among the country’s best performers. Securities due in 2024 have surged to 96 cents on the dollar, from as low as 20 cents in the weeks after the bankruptcy filing in May 2020. Overseas creditors will probably get about 100 cents on the dollar for their bonds after the restructuring is over, compared with just 20 cents for holders of the domestic bonds, according to estimates from AlixPartners cited in minutes from a local creditors meeting in December.<br/>