Aeroméxico talks DIP financing

Aeroméxico talks DIP financing

Debt Regulation Coronavirus Mexico US

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Mexican airline Aeroméxico is in talks to obtain debtor-in-possession (DIP) financing, looking to secure sufficient liquidity to keep flying as it goes through bankruptcy proceedings in the United States.

Aeroméxico said in a securities filing on Tuesday evening that it filed for Chapter 11 protection, which made it the third airline in Latin America to look for ways to restructure debt as travel restrictions during the COVID-19 put in a crimp in earnings.

"We expect to utilize the Chapter 11 process to strengthen our financial position, obtain new financing and increase our liquidity, and create a sustainable platform to succeed in an uncertain global economy," CEO Andrés Conesa said in the filing.

In the meantime, the airline expects to double the number of domestic flights and quadruple the number of international flights in July, compared to numbers from June, as travel restrictions are lifted gradually in Mexico and abroad.

Canada's Aimia, which owns a minority stake in the loyalty program operator PLM Premier, has provided $100 million in financing to Aeroméxico, including a $50 million advance earlier this week. It also granted the Mexican airline a seven-year option to buy its 48.9% stake in PLM for $400 million or 7.5 times EBITDA, whichever is greater. Aeroméxico owns 51.1% of PLM.

Aeroméxico said on June 19 that it was considering ways to carry out an "orderly restructuring" of its short- and medium-term debt and added that it was looking for additional sources of financing. The Mexico City-based carrier joins Colombia's Avianca and Chile's LATAM Airlines in filing for bankruptcy protection in US courts.

Before the coronavirus pandemic spread to Mexico, Aeroméxico added $400 million to its debt load in February by selling new five-year notes to yield 7%.

Shares in Aeroméxico fell 28.5% to close at MXN4.17 ($0.18) on Wednesday.