Qatar Airways has hired Weil, Gotshal & Manges LLP in New
York and Carey in Santiago to acquire a 10 per cent stake in
Chilean counterpart LATAM for US$613 million.
LATAM, the region's largest carrier, turned to Sullivan
& Cromwell LLP's Washington, DC and New York offices and
Claro & Cía in Santiago for the transaction, which was
announced on Tuesday. The deal calls on LATAM shareholders to
approve a capital increase through the issuance of new shares by
the 2 September. Qatar will then acquire these shares, which will
be priced at US$10 each.
LATAM's share price was up 17 per cent on Wednesday
following the deal's announcement. The company has been
struggling to stay solvent as economic recession, slowing foreign
investment and currency fluctuations in countries across Latin
America take their toll. This has led LATAM to pursue some of the
most innovative financing options on the market, including a series
of precedent-setting aircraft-backed credit facilites, which closed
in June 2015 and April this year.
With its deal with Qatar all but approved, the Chilean airliner
now says it will have cash reserves totaling US$1.5 billion by the
end of 2016.
Meanwhile, Qatar's acquisition marks its entry into the
Latin American market. The company admits that regional demand is
currently lacklustre, but expects the situation to improve as Latin
America's squeezed middle class recovers.
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In order to remunerate the invested capital, Brazilian companies are allowed to distribute earnings to their shareholders in the form of dividends or under the concept of interest on net equity (juros sobre o capital próprio – JCP).
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