in Re: LATAM Airlines Group S.A.

Background

LATAM Airlines Group S.A. and affiliates began Chapter 11 bankruptcy proceedings in the Southern District of New York. LATAM proposed a reorganization plan that would raise more than $8 billion. As part of that plan, certain creditors and shareholders agreed to support the plan and backstop portions of proposed securities offerings.

LATAM asked the Bankruptcy Court to approve two post-petition Backstop Agreements. In exchange for the backstop commitments and other support, LATAM agreed to pay the Commitment Creditors approximately $734 million in fees and to provide expense reimbursements and indemnification protections to the Commitment Creditors and the RSA Shareholders. The agreements also included conditions tied to confirmation of the reorganization plan.

The Bankruptcy Court approved LATAM’s entry into and performance of the Backstop Agreements on March 15, 2022. It approved the fees, expenses, and indemnification obligations under provisions governing the bankruptcy estate’s use of property and administrative expenses. It treated the stakeholders’ objections based on Chapter 11 plan-confirmation requirements as premature and overruled those objections without prejudice to raising them during plan confirmation.

The Appeal and Motion to Dismiss

Banco del Estado de Chile, the Official Committee of Unsecured Creditors of LATAM, the Ad Hoc Group of Unsecured Claimants, and Columbus Hill Capital Management L.P. appealed the Bankruptcy Court’s order. They argued, among other things, that the Bankruptcy Court should have applied Chapter 11 requirements concerning equal treatment within a class and the reasonableness of payments made under a plan.

LATAM moved to dismiss the appeal for lack of jurisdiction. It argued that the Backstop Order was not a final order appealable as of right under 28 U.S.C. § 158(a)(1). LATAM also argued that the stakeholders had not met the standard for permission to appeal an interlocutory, or nonfinal, order under 28 U.S.C. § 158(a)(3).

Ruling

Judge Jesse M. Furman granted LATAM’s motion to dismiss the appeal. He held that the Backstop Order did not finally resolve a separate dispute within the larger bankruptcy case. The order was an interim step toward confirmation of LATAM’s plan, the backstop commitments depended substantially on confirmation, and the stakeholders’ Chapter 11 objections remained tied to the confirmation proceedings.

The court also emphasized that the Bankruptcy Court had expressly reserved judgment on important objections, including objections under Sections 1123(a)(4) and 1129(a)(4) of the Bankruptcy Code. Those objections could be raised in connection with plan confirmation. The district court concluded that reviewing the appeal before the confirmation hearing would risk delay and piecemeal appeals.

The court separately declined to grant permission for an interlocutory appeal. Applying the standard generally used for such appeals, the court found that the stakeholders plainly had not shown that immediate review would materially advance the end of the bankruptcy litigation. The court did not decide whether the stakeholders’ underlying objections to the Backstop Agreements were legally valid. The Clerk was directed to close the case and terminate the identified motions.