LATAM Airlines became the first airline in South America to secure a «Sustainability-Linked Loan» worth 300 million dollars.
The region’s largest airline signed an agreement with Crédit Agricole Corporate & Investment Banking and BNP Paribas for a revolving credit facility, similar to the functionality of a credit card, allowing LATAM to access additional long-term financing under special conditions on its interest rates, as long as it meets a series of sustainability goals.
This financial move adds to the company’s return to the New York Stock Exchange and the report of net earnings totaling 301 million dollars during the third quarter of 2024. LATAM has accumulated a total of 705 million dollars in net earnings from January to September this year.
Andrés del Valle, VP Corporate Finance of LATAM Airlines Group, stated that «we continue to bring good news. This is our first financial product linked to sustainability, and we see it as a first step toward exploring other similar instruments in the future, such as sustainability-linked bonds.»
Del Valle added that «this milestone not only reinforces the commitment to being a more sustainable group, aligned with our strategy and actions focused on climate change, circular economy, and shared value, but also positions LATAM as a pioneer in promoting sustainability-linked financing in the aviation sector in the region.»
The loan refinances an existing credit line for engines («Spare Engine Facility» or «SEF»), which has been part of LATAM’s capital structure for the past decade. The refinancing enabled a significant reduction in the interest rate, an optimization of the line’s guarantees, and an extension of its duration.
The transaction includes sustainability-linked provisions, under which LATAM may receive price adjustments depending on its performance regarding the carbon emissions intensity of its operations, measured as tons of CO2 emissions per revenue ton-kilometer (RTK). This inaugural sustainability-linked financing supports the company’s strategy, particularly its goal of achieving net-zero emissions by 2050.
