Material Facts

JANUARY 15 / CONTRACT EXECUTION OR RENEWAL

  1. LATAM announces to have executed two independent commercial agreements. On the one hand, with British Airways and Iberia airlines of the International Airlines Group S.A. (”IAG”) and, on the other hand, with American Airlines. These agreements represent an intensification of LATAM’s collaboration with the members of the OneWorld Alliance.
  1. These agreements will bring about important benefits to passengers and clients upon expanding the number of destinations available, providing access to more convenient prices, improving the travel experience by delivering more itinerary options with reduced connection times, while increasing the potential of opening up new routes and more direct flights to new destinations or currently operated by the mentioned airlines. These new services and options will also be made available to LANPASS and TAM Fidelidade frequent passengers. These agreements will also benefit South America upon improving its connectivity to/from the region to the world, boosting tourism and business travel
  1. The mentioned agreements follow a worldwide industry trend, consisting in deepening collaboration between inter-alliance airlines, which most of the world’s main Airlines have already executed.
  1. The commercial agreement with British Airways and Iberia will include managing the operation of the routes between Europe and all the countries that operate these airlines in South America.
  1. On the other hand, the agreement with American Airlines will include the flights between the United States of America and Canada and six South American countries; namely, Brazil, Chile, Colombia, Paraguay, Peru and Uruguay.
  1. These two LATAM agreements with OneWorld members will allow, on the one hand, that the airlines that are part of the LATAM Airlines Group, British Airways and Iberia, manage the networks between South America and Europe; and, in case that the same airlines of the LATAM Airlines Group and American Airlines manage certain routes between South America and the United States / Canada.
  1. These agreements are of a commercial nature; they do not involve any shareholding in LATAM nor imply any management change whatsoever in any of the airlines that comprise the LATAM Group. After its execution, each airline maintains its brand and operations independently as well as their control over their own flights.
  1. The execution of these commercial agreements is subject to their approval by the pertinent authorities in the different countries in which the airlines that are part of such agreements operate; a process estimated to take anywhere between 12 to 18 months. Likewise, upon obtaining such approvals, each commercial agreement must be executed by their respective parties within the deadlines established to that effect and subject to completion of the commercial agreements in all pending aspects contemplated therein. 

MARCH 8 / OTHERS

On this date, and without prejudice of the delivery of the corresponding financial statements within the applicable deadlines to that effect, the Directors’ Committee and the Board of Directors of LATAM Airlines Group S.A., has approved the publication, by way of an Essential Fact, the financial information attached to this communication. This corresponds to a summary of the financial information taken from the company’s Financial Statement and the Consolidated Balance Sheet, which will also incorporate a qualitative analysis of the company’s operating performance both during the year as during the fourth quarter of the year ended on December 31, 2015.

LATAM Airlines Group S.A. is providing this financial information to its shareholders, investors and market in general in order to deliver truthful, sufficient and timely advance information, prior to releasing the respective financial statements pursuant to the deadlines applicable to that effect.

Finally, it is here stated for the record that this financial information does not in any way replace or modify the corresponding financial statements of the company, which shall be released for the purposes of the year 2015 within the deadlines prescribed by the regulations issued by the Superintendence for Securities & Insurance.

 

MARCH 21 / EXTRAORDINARY SHAREHOLDERS’ MEETING, SUMMONS, AGREEMENTS AND PROPOSALS.

At the Ordinary Shareholders’ Meeting held on March 21, 2016, the Board of Directors of LATAM Airlines Group S.A. (hereinafter, the “Company”), Securities Register No. 306, agreed to summon to an Ordinary Shareholders’ Meeting to be held on April 26, 2016 at 10:00 hours, in order to discuss the following agenda:

  1. To approve the Company’s Balance Sheet and Financial Statements, corresponding to the year ended on December 31, 2015;
  2. To determine the remuneration of the Company’s Board of Directors;
  3. To determine the remuneration of the Company’s Directors’ Committee and its budget;
  4. To designate the Company’s external auditors; Risk Classification Agency; and, to report about those topics referred to under Title XVI of Law N° 18,046 on Corporations.
  5. To inform about the cost of processing, printing and delivering the information referred to under Circular Letter N° 1.816 of the Superintendence for Securities & Insurance;
  6. To designate the newspaper in which to make the publications of the Company; and,
  7. Other topics of corporate interest incumbent upon the Company’s Ordinary Shareholders’ Meeting.

APRIL 5 / OTHERS

1- The Securities Commission (CVM, in its Portuguese acronym) of the Republic of Brazil, authorized on February 2, 2016 via Official Memorandum N° 70/2016-CVM/SRE/GER-2, the termination of the Brazilian Depositary Receipts (“BDRs”) program of the LATAM Airlines Group S.A., which is to be executed pursuant to the procedure approved by said authority in the above-cited Official Memorandum (hereinafter, the “Termination Procedure”).

2- The Company reported on February 5, 2016, as market interest information, the CVM’ approval of the project under evaluation to discontinue the BDR program, noting that such project should in the future be subjected to the consideration of the Company’s Board of Directors.

3- The Board of Directors of the LATAM Airlines Group S.A. approved as of this date to terminate the BDR program registered before the CVM, pursuant to the above-described Termination Procedure and, consequently the termination of its registration as foreign securities issuer before the CVM; all of it pursuant to the regulations of applicable in the Republic of Brazil. LATAM’s Board of Directors calls the attention to the fact that the foregoing does not affect the LATAM Airlines Group’s long-term commitment with Brazil.

4- It is here stated for the record that each such BDR certificate represents one (1) common share (equity shares) of the LATAM Airlines Group S.A. and that as of March 31, 2016 the BDR program represented 0.44% of all the shares of shares issued by the Company.

5- Therefore, as of this date and for a 30-day period beginning on this date, BDR holders shall have the following options:

I. To adhere to the so-called “Sale Facility” procedure; or,

II: To maintain their ownership title over LATAM Airlines Group S.A.’s common shares underlying the respective BDR.

6- If a BDR holder does not state the option to which it adheres pursuant to the Procedure; then, for all purposes, it shall be understood to adhere to the so-called “Sale Facility” procedure.

7- The “Sale Facility” procedure is executed by selling the underlying BDR common shares (the “Common Shares”) at the Santiago Stock Exchange. Those BDR holders to manifest their intention to remain the property owners of the respective Common Shares shall become shareholders of the LATAM Airlines Group S.A. by conveying such shares to a stock broker or custodian in Chile, pursuant to instruction to be executed subject to compliance with the terms and conditions set forth in the Cancellation Procedure.

8- Attached is a copy of the free translation into Spanish of the corresponding Essential Fact (“Fato Relevante”) forwarded to the CVM as of this same date. It is here stated for the record that the notification to BDR Holders reporting the cancellation of the BDR program of LATAM Airlines Group S.A. as well as the instructions, terms and conditions applicable to the same, shall be communicated to the CVM on April 6 of the present year and published in Brazil by LATAM Airlines Group S.A. on April 7, 2016 in the Official Gazette of the State of Sao Paulo and in the LATAM website: http://www.latamairlinesgroup.net .

9- Finally, we hereby state for the record that BDR are foreign securities that are not registered with the Superintendence for Securities & Insurance.

MAY 23 / OTHERS

  1. On April 5, 2016, LATAM reported, as an Essential Fact, the cancellation procedure of the Brazilian Depositary Receipts (BDR) program of the LATAM Airlines Group S.A., which must be executed according to the procedure approved and described in such communication (hereinafter, the “Cancellation Procedure”).
  2. According to the Cancellation Procedure, whose general terms were published by LATAM on April 7, 2016 in: the Official Gazette of the State of Sao Paulo, in Economic Value, and in LATAM’s website: http://latamairlinesgroup.net (hereinafter, the “Notification”), May 9, 2016 was the deadline for BDR holders to state their option to keep the underlying common stock of such BDR (the “Shares”) and, on May 23, 016, BM&FBOVESPA blocked the respective balances of those BDR that opted in favor of adhering to the sale procedure of the Shares at the Santiago Stock Exchange, through the so-called Sale Facility.
  3. In tandem with such blockage, a theoretical sale value was attributed in Brazil to the sale of the Shares at the Santiago Stock Exchange in the amount of $4,333,80 (four thousand three hundred and thirty three pesos and eighty cents, of Chile’s legal currency), corresponding to the market value of such Shares as of May 23, 2016, equivalent in Brazilian Reals to R$22,25 (Twenty-two reals and twenty-five cents, of Brazil’s legal currency) per Share, converted on the basis of the PTAX rate of foreign exchange, which is defined as the average foreign exchange sale rate in the foreign exchange market in effect on May 23, 2016; an average that is released electronically by Brazil’s Central Bank via the internet.
  4. Additional information and instructions regarding the Cancellation Procedure may be obtained from the Essential Fact of last April 5 and the Notification.
  5. Finally, LATAM informs that the next Essential Fact regarding the Cancellation Procedure is scheduled to be published on June 9, 2016, in order to report about: the total amount of Shares sold in Chile according to the so-called Sale Facility; the average Chilean-peso price of each BDR; the payment date to BDR holders; and the final price in Reals (Brazil’s legal currency) payable for each BDR, among other relevant information with respect to the sale of the Shares.

 

JUNE 7 / CHANGES IN MANAGEMENT

On this date, the Board of Directors accepted the resignation submitted by Mr. Ricardo J. Caballero as Board Member, considering that he has assumed new functions in his country of residence; namely, the United States of America, that prevent him from discharging his duties as LATAM Board Member.  For the time being, the Board did not agree to appoint a replacement, which could take place during the next Board Meeting,  Likewise, the entire Board of Directors must be renewed at the Company’s upcoming Ordinary Shareholders’ Meeting.

JUNE 9 / OTHERS

  1. On April 5, 2016, LATAM reported, as an Essential Fact, the cancellation procedure of the Brazilian Depositary Receipts (BDR) program of the LATAM Airlines Group S.A., which must be executed according to the procedure approved and described in such communication (hereinafter, the “Cancellation Procedure”).
  2. According to the Cancellation Procedure, whose general terms were published by LATAM on April 7, 2016 in: the Official Gazette of the State of Sao Paulo, in Economic Value, and in LATAM’s website: http://latamairlinesgroup.net (hereinafter, the “Notification”), May 9, 2016 was the deadline for BDR holders to state their option to keep the underlying common stock of such BDR (the “Shares”) and, on May 23, 016, BM&FBOVESPA blocked the respective balances of those BDR that opted in favor of adhering to the sale procedure of the Shares at the Santiago Stock Exchange, through the so-called Sale Facility.
  3. On May 24, 2016, LATAM reported, as an Essential Fact, occurring last May 23, of the deadline for BDR holders to state their option to keep the Shares and of the blockage on that same date on the part of BM&FBOVESPA of the respective Share balances of those BDR holders that opted in favor of adhering to sell their Shares through the procedure so-called Sale Facility, assigning them to that effect a theoretical sale value at the Santiago Stock Exchange.
  4. On this same date, we hereby report that BTG Pactual Chile S.A. Corredores de Bolsa stock brokerage company (“BTG Pactual Chile”), a Chilean institution contracted by the Company to that effect, sold at the Santiago Stock Exchange the Shares of the respective holders who had adhered to the Sale Facility
  5. In that sense, on June 2, 2016, via an auction sale at the Santiago Stock Exchange, were sold 672,500 (six hundred seventy-two thousand five hundred) Shares at an average price of $4,150.038 (four thousand one hundred and fifty pesos and zero-thirty-eight cents, legal currency in Chile) per Shares, equivalent in reals to R$20.528003378 (twenty reals and five-two-eight-zero-zero-three-three-seven-eight cents, legal currency in Brazil) per Shares, converted on the basis of the purchasing rate of the foreign currency exchange market of June 8, 2016; that being the price per BDF payable by the respective holders.  The payment shall be made on July 16, 2016, via a transfer from Itaú Corretora de Valores S.A. (“Itaú Corretora”) to BM&FBOVESPA (which, in turn, shall be responsible for transferring such funds to their respective property owners, via their custody agents.  Those BDR holders keeping their title certificates directly in Itaú Corretora shall receive their funds directly from said institution.
  6. For additional information and instructions with respect to the Cancellation Procedure you may refer to the Essential Facts of last April 5 and May 23 and to the Notification.

 

JULY 12 / OTHERS

1- Capital increase. At the next Ordinary Board of Directors’ Meeting, which is scheduled for no later than August 2, 2016, the Company will summon to an Extraordinary Shareholders’ Meeting (the “Shareholders’ Meeting”) with the purpose of proposing a capital increase of US$ 613,164,240 by issuing 61,316,424 new cash shares (the “Cash Shares”) at a price per share of US$ 10 (the “Subscription Price”). Because of the Shareholders’ Meeting to be held by no later than September 2, 2016, the equity capital of LATAM Airlines will increase from the current 551,847,819 shares to 613,164,243 shares; thus, following the capital increase such Cash Shares will represent 10% of all Company shares.

2- Investor. As of this date, Qatar Airways (the “Investor”) has undertaken to acquire up to 10% of LATAM Airlines shares. The investor undertook to subscribe and pay the Cash Shares permitted by the Assignment of Options (as defined in the following paragraph) prior to the expiration of the subscription option period, as well as to subscribe such non-subscribed shares that the Company may offer it immediately following the completion of such period (jointly, the “Subscriptions”).

3- Support. On this same date, each one of the shareholders of the Cueto groups: Amaro, Eblen and Bethia (the “Support Shareholders”); which represent 49.72% of LATAM Airlines currently subscribed and paid shares, has undertaken to attend the Shareholders’ Meeting and vote in favor of the subject matters to be proposed therein.  Likewise, as soon as the Company launches the subscription option period for the Cash Shares, each Support Shareholder has undertaken to assign and transfer to the Investor its right to subscribe its corresponding prorated amount of Cash Shares, at a nominal value (jointly with the “Assignment of Options”).

4- Purchase Order. In the event that, upon materializing the Subscriptions, the shares to which the Investor is the property owner were below 10% of all the shares issued by the Company, the Investor undertook to issue an unconditional Purchase Order for a period of 20 days at the Santiago Stock Exchange for the balance, in a manner such as to reach 10% of the Company’s total shares, at a price per share equal to the Subscription Price (the “Purchase Order”).

5- Purchase from TEP. Only if upon materializing the Subscriptions and the Purchase Order, the shares of stock owned by the Investor were below 10% of all the shares issued by the Company, and with the sole purpose of facilitating the Investor reaching 10% of the Company’s total shares, the TEP Chile S.A. shareholder (a company owned by the Amaro Group) has undertaken to sell to the Investor, and the latter has undertaken to purchase, at a price per share equal to the Subscription Price, the balance of shares required to reach such 10%  (the  “Purchase from TEP”); in the understanding that such commitment does not extend beyond 2.5% of the total number of Company shares.

6- Market. In the event that, upon materializing the Subscriptions and the Purchase Order from TEP the shares of stock owned by the Investor were below 10% of all the shares issued by the Company, the Investor shall be entitled to purchase the remaining shares in Chile’s secondary market (shares traded at the stock exchange) and in New York (ADR at the New York Stock Exchange).

7- Transfers and Commitments. The Investor shall be free to transfer its stock ownership in the Company, after agreeing to certain registration rights aimed at an orderly secondary issue and other usual restrictions.

Recognizing the relevance that the OneWorld® Alliance has for the company, the Investor has undertaken that a sale of its shares in the company at an airline outside such Alliance requires the prior consent of the Board or must be executed through a mechanism that would allow all Company shareholders to sell.

In addition to the restrictions stated in the previous paragraph, in order not to cause major stock market disruptions, the Investor has undertaken not to sell, during the first year following the last Subscription, shares representing over 2% of all Company shares, and not to exceed selling 5% of all Company shares within any 12-month period henceforth.

During a 30-month period counted from the last Subscription, the Investor undertook not to increase its Company shareholding over and above 10% of all Company shares and not to propose revoking the Board of Directors elected by the shareholders, nor a transition aimed at causing a change of control of the Company.

8- Board of Directors. If a vacancy were to arise in the Board of Directors prior to the 2017 Ordinary Shareholders’ Meeting and the Investor owned at least a 7.4% shareholding of the total amount of shares issued by the Company; then, the Board shall nominate the person to be proposed by the Investor to replace such vacancy, provided it is acceptable to the Board.

Likewise, if at the 2014 Ordinary Shareholders’ Meeting the Investor did not manage to elect a Board Member and, following such Shareholders’ Meeting there is a vacancy in the Board of Directors and provided that the Investor owns at least a 7.4% shareholding of the total amount of shares issued by the Company; then, the Board shall nominate the person to be proposed by the Investor to replace such vacancy, provided it is acceptable to the Board.

As of this date, the communication reservation submitted as an Essential Fact on June 7, 2016, and whose content is refurbished with the agreements depicted in the present communication, is hereby removed.

As of this date it is not possible to determine the financial effects that the topics reported hereunder may have over the Company’s assets, liabilities or income.  It is estimated, however, that the Subscriptions will be materialized within the fourth quarter of 2016.  The Company shall keep that Superintendence duly apprised of any relevant development occurring in relation to the events reported hereunder.

 JULY 13 / OTHERS

In addition to the Essential Fact reported to that Superintendence on July 12, 2016, we hereby inform that the funds to be obtained from the capital increase to be proposed will be allocated to preserve the Company’s balance sheet and pay short- term financial commitments (whose amount and definition is under evaluation). The foregoing will mean an increase of cash available for the end of the year 2016, estimated at US$ 1,500 million, which, in turn will enable approaching LATAM’s strategic plans on a solid financial basis.

At the time of publishing the first summons to the Shareholder Meeting we will upload, into to the Company’s internet website: www.latamairlinesgroup.net , the background information that supports the proposals to be voted upon.

 

JULY 18 / EXTRAORDINARY SHAREHOLDERS’ MEETING, SUMMONS, AGREEMENTS AND PROPOSALS

 The Company’s Board of Directors has agreed to summon to an Extraordinary Shareholders’ Meeting to be held on August 18, 2016 in order to propose a capital increase to LATAM Airlines totaling US$ 613,164,240 via the issue of 61,316,424 Cash Shares, all of them common stock, without any nominal value at an issue price of US$ 10 per share, thereby authorizing the Company to place the remaining non-subscribed shares following the subscription period to be subscribed by Qatar Airways.

The notifications and summoning letters, as well as the background information that support the proposals to be submitted to a vote, shall be forwarded and made available to shareholders pursuant to the terms provide by the Law on Corporations (“Ley Sobre Sociedades Anónimas”).

 

JULY 25 / OTHERS

LATAM informs that it executed agreements with the U.S. Department of Justice (“DOJ”) and with the U.S. Securities and Exchange Commission (“SEC”), both of them authorities of the United States of America in effect as of this date, the contents of which are essentially similar to that depicted in the reserved Essential Fact submitted before that Superintendence on May 3, 2016, a copy of which is attached to this Essential Fact and is an integral part of same for all purposes.  The amounts ultimately agreed to be paid are: US$ 12,750,000 to the DOJ and US$ 6,700,000 plus interest to the SEC.

May3 / Essential and Reserved Fact

1- With respect to the investigation of the U.S. Securities and Exchange Commission (“SEC”) and the U.S. Department of Justice (“DOJ”), both of them authorities of the United States of America, regarding payments totaling US$ 1,150,000 made during 2006-2007 by LAN Airlines S.A. (“LAN”) to a consultant that provided professional advice with respect to labor affairs in Argentina; investigation with which LATAM has cooperated actively, this Board of Directors hereby reports as an Essential and Reserved Fact that following an extensive exchange of opinions between LATAM lawyers with both SEC as well as DOJ representatives regarding the facts subject of that investigation and legal evaluation, the referred professional advisers arrived at the conclusion that the way available to put an end to it requires searching and executing agreements with such authorities that would consider the payment of fines and other provisions as described hereunder.

2- The purpose of the investigation was to inquire whether such payments infringed anticorruption regulations of the United States of America (“FCPA”); which: (i) bars the payment of bribes to foreign government officials in order to obtain commercial advantage; and (ii) requires the companies governed by such regulations to keep adequate accounting records, as well as maintaining an adequate system of internal controls. The alluded FCPA indeed applies to LATAM because of its ADR program that is currently in effect in the North American securities market.

3- Following an extensive investigation, the DOJ and the SEC concluded that there were no infringements of FCPA regulations barring the payment of bribes, which is consistent with the results of LATAM’s own internal investigation. Nevertheless, the DOJ and the SEC considered that LAN would have incorrectly registered the mentioned payments in its accounting and, consequently, that it would have violated that part of the FCPA that requires companies to enter and maintain precise accounting records. Moreover, the referred authorities considered that LAN’s internal controls in place during 2006-2007 were indeed deficient; reason why LAN would have additionally violated FCPA regulations requiring the maintenance of adequate internal controls.

4- Under these circumstances, LATAM lawyers held numerous and extended exchanges of opinions and conversations with the DOJ and the SEC. On the basis of the information that about such exchanges and conversations was subsequently provided by LATAM lawyers, this Board of Directors has decided to seek and an agreement with both such US authorities.

5- In effect, LATAM lawyers recommended as of this date to this Board of Directors to reach an agreement with both such authorities that would consider the following terms and conditions:

  • With respect to the DOJ, the agreement would primarily consider: (i) executing a contract denominated Deferred Prosecution Agreement (“DPA”), which is a public contract by means of which the DOJ would publicly file charges alleging violation of the regulations regarding FCPA accounting records; LATAM would not be obligated to respond such charges, the DOJ would not prosecute such charges for a 3-year period and would dismiss the charges upon the expiration of such deadline assuming that LATAM met all DPA terms; the foregoing, in exchange for LATAM’s admission of a number of negotiated facts to be described in the DPA and that it agrees to pay the negotiated fine mentioned herein below as well as the other conditions mentioned in such agreement; (ii) clauses by means of which LATAM would admit that the accounting of the payments made to the consultant in Argentina was incorrect and that, at the time when such payments were made (years 2006-2007), it lacked adequate internal controls; (iii) the acceptance by LATAM of an external consultant, for 27 months, whose function would be to monitor, evaluate and report to the DOJ about the efficacy of LATAM’s compliance program, and also the acceptance by LATAM to continue, for 9 months after completing the work of the external consultant, evaluating and directly informing the DOJ regarding the efficacy of the referred compliance program; and, (iv) pay an estimated fine of US$ 12,500,000 as it may be agreed to in the DPA.
  • With respect to the SEC, the agreement would primarily consider: (i) executing a contract that would contain what is denominated a Cease and Desist Order, which is an SEC administrative resolution to close an investigation, by means of which LATAM would undertake certain obligations and statement of facts that would be described in the document; (ii) a reproduction of the obligations with respect to the consultant mentioned under the preceding number 5(a)(iii); and, (iii) and to pay the approximate amount of US$ 6,500,000 plus interest.

6- The documents to be included in such agreements between LATAM and the DOJ and the SEC are yet undergoing negotiations; and it is relevant, for the purpose of determining whether or not final agreements will be executed, to review and agree each one of the facts to be described and the obligations to be undertaken in each of the documents that must be ultimately executed.

7- Considering that such negotiations are still pending, it is not possible at this time to state with certainty if final agreements will be eventually agreed to. Nevertheless, the Board has instructed the lawyers to continue their negotiations under the terms and conditions described in this instrument and to be kept duly apprised of same through the Company’s Legal Department.

8- It is estimated that the information regarding this Essential and Reserved Fact will remain so for an approximate period of 60 days. With the attendance of Board Members, Messrs. Henri Philippe Reichstul, Georges Antoine de Bourguignon Arndt, Ricardo J. Caballero Gibbons, Ramón Eblen Kadis, Carlos Alberto Heller Solari, Juan Gerardo Jofré Miranda and Juan José Cueto Plaza, the Board of Directors has instructed to issue this information in a reserved manner, since it refers to pending negotiations whose disclosure at this time might damage the interests of the Company, among other reasons, because the same US authorities that conduct the investigation have stated their objection to disclosing the contents of an eventual agreement for as long as negotiations remain pending.

Finally, we hereby inform that the following persons have been apprised of the resolution of this Board of Directors reported hereunder:  the above-mentioned LATAM Board Members are: LATAM’s General Manager, Mr. Enrique Miguel Cueto Plaza; the CEO of LAN Airlines S.A. Mr. Ignacio Cueto Plaza; LATAM’s Senior Vice-president of Finance, Mr. Andrés Osorio Hermansen; the Senior Board Member of Investor Relations, Ms. Gisela Escobar Koch; LATAM’s Vice-president for Corporate Affairs, Mr. Gonzalo Undurraga Pellegrini; LATAMs Senior Legal Vice-president Mr. Juan Carlos Menció; LATAM’s Legal Vice-president, Mr. Cristián Toro Cañas; and the external legal consultants, Messrs. Roger Witten, Claudio Salas, Cristóbal Eyzaguirre Baeza, José Miguel Huerta Molina, Juan Pablo Celis Morgan and Tomás Ignacio Kreft Carreño.

OCTOBER 5 / PLACEMENT OF SECURITIES IN INTERNATIONAL AND/OR DOMESTIC MARKETS

  • LATAM Airlines Group S.A. (“LATAM” or the “Company”), has announced its intention to issue and place in the international markets, non-guaranteed long-term bonds under the aegis of Norm 144-A and Regulation S of the securities laws of the United States of America (the “144-A Bonds” or the “Issue”) ;
  • In order to materialized such bond Issue, a special investment vehicle has been incorporated, denominated Latam Finance Limited (“LATAM Finance”), a legal entity incorporated in the Cayman Islands 100% owned by LATAM, which shall be the issuer of the 144A Bonds and whose obligations, assumed by virtue of the Issue, shall be guaranteed by LATAM, all of which has been duly approved by the Company’s Board of Directors.
  • Citigroup Global Markets  (the “Bidder”), by virtue of an Offer to Purchase drafted in English as of this same date (hereinafter, the “Bid”) and, in turn, in representation of

LATAM Finance, TAM Capital Inc. (“TK”) and TAM Capital 3 Inc. (“TK3”) (these two latter companies being TAM S.A. subsidiaries, duly incorporated and existing pursuant to the laws of the Cayman Islands) has announced the buy-back, exchange and partial redemption of a portion to be determined of the remainder (balance) of TAM Capital Inc.’s bonds (“TK”) and TAM Capital 3 Inc. (“TK3”) (“Intermediated Tender Offer”), which were placed in the market as follows: (i) TK in the year 2007 at a rate of 7.375% for an amount of US$ 300,000,000 with original expiration in the year 2017  (“TAM 2017”), and (ii) TK3 in the year 2011, at a rate of 8.375% for an amount of US$ 500,000,000 with original expiration in the year 2021 (“TAM 2021”). Both bond issues were materialized pursuant to Norm 144-A and Regulation S of the securities laws of the United States of America.

It is the intention of the Bidder that all TAM 2021 Bonds and TAM 2017 Bonds to be acquired by virtue of the referred Bid be exchanged by the Bidder with LATAM Finance, for a portion of the

144-A Bonds issued and placed by LATAM Finance by virtue of the Issue. Therefore, the objective of placing the 144-Bonds shall be: (i) to finance in part the buy-back, exchange and redemption of the

TAM 2021 Bonds and TAM 2017 Bonds; and, (ii) should there be any remaining (residual) bonds, to finance other general corporate ends.

Such buy-back, exchange and partial redemption Bid for the TAM 2021 Bonds and the TAM 2017 Bonds shall be executed in a staggered manner; the TAM 2021 Bonds first in a portion to be determined and decided by the Company, and, afterwards, depending on the outcome of the Issue, the TAM 2021 Bonds in an amount to be determined and decided by the Company.

Pursuant to the provisions of Circular Letter N° 988 of the Superintendence for Securities & Insurance, we hereby report to you that at this stage it is not possible to quantify the effects that this operation will have on LATAM’s income position, should it be materialized.

Finally, we hereby state for the record that LATAM Airlines Group S.A. will issue, as information of market interest, the press releases that are attached to the present Essential Fact in order to provide further background information with respect to the operations regarding the issuance of the 144-A Bonds and the buy-back, exchange and partial redemption of the TAM 2021 Bonds and TAM 2017, to be distributed in the relevant markets in which such operations are to take place.

OCTOBER 6 / OTHERS

In a manner complementary to the Essential Fact reported by LATAM to that Superintendence on October 5, 2016, we hereby attach the press releases issued by way of market interest information.

OCTOBER 20 / PLACEMENT OF SECURITIES IN INTERNATIONAL AND/OR DOMESTIC MARKETS

 

LATAM Airlines Group S.A. (the “Company”) has decided not to pursue the purchasing bid submitted via Citigroup Global Markets Inc. on October 5, 2016, denominated “Offer to Purchase”,

whose objective was to buy-back, exchange and redeem a portion of the remaining (residual) bonds issued by TAM Capital Inc. and TAM Capital 3 Inc., both of them subsidiary companies of TAM S.A., legally incorporated pursuant to the laws of the Cayman Islands, whose expiration had been set for the years 2017 and 2021, respectively (hereinafter, the “Bid”), all of which was duly reported to this Superintendence last October 5.

The referred Offer to Purchase included certain conditions in order to activate the Offer, one of which was indeed not met; which, in turn, led the Company to discontinue it and not go forward with its intention to issue and place non-guaranteed long-term bonds in the international market under the aegis of Norm 144-A and Regulation S of the securities laws of the United States of America, according to the terms and conditions set forth in the referred Essential Fact reported last October 5.