Brazil’s Latam bailout can be postponed until at least July
LATAM Airlines Group’s US bankruptcy filing last week will delay its potential bailout in Brazil until at least July and also push back aid to its competitors at least until the end of June.
The delay will add further tension to Brazilian airlines, which were already in a weak condition before the pandemic. Competitors Azul SA and Gol Linhas Aereas Inteligentes SA are also negotiating a bailout.
“Bailouts will occur; what can happen is that it may be staggered because of the LATAM situation, “said a source. Neither LATAM nor the Brazilian state development bank, BNDES, which coordinates the bailout, has no direct comment.
LATAM’s bankruptcy filing last week has caused private banks to worry about the survival of Brazilian airlines after the pandemic, the source said.
LATAM’s subsidiary in Brazil is not part of US bankruptcy, although executives recognize that it may also be through court restructuring.
State and private banks are also worried that layoffs will not be avoided, which could have a negative political impact, the source said.
LATAM has not denied laying off workers. LATAM’s Brazilian CEO, Jerome Cadier, has anticipated that the company will be downsized and that layoffs are not prohibited based on the current draft government bailout requirements.
He added that if layoffs were banned, the rescue program had to be far greater. At present, the bailout is worth 6 billion reais.
LATAM’s bankruptcy also raises questions about collateral for bailout loans.
It is suspected that the Brazilian government is still looking for the best way to lend to LATAM considering its parent company is in bankruptcy protection. Usually development banks ask for guarantees from the parent company.
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