Latam Airlines Slumps in Chile on New Stock Sale Concern

Latam Airlines SA (LFL) posted its longest streak of losses in six months after the airline’s chief executive officer said it is considering selling new stock to help reduce debt and regain an investment-grade credit rating.

Latam, which became the world’s most valuable carrier when it bought Brazil’s Tam SA in June, retreated for a seventh day, dropping 1.8 percent to 11,053 pesos at the close of trading in Santiago. It was the biggest decline in Chile’s benchmark Ipsa index, which fell less than 0.1 percent.

The airline had its credit rating reduced to BB+ from BBB by Fitch Ratings, one level below investment grade, on the day the combination with the Brazilian carrier was completed. CEO Enrique Cueto told Diario Financiero in an interview that Latam is considering a share sale to improve debt ratios, which Fitch has said could lead to an upgrade.

“The decline today is obviously related to the news, although the stock has been falling ever since the merger as the market is expecting announcements on how it plans to recover its investment grade,” Pablo Alvarez, an analyst at Banco Penta, said in a phone interview from Santiago.

Latam, based in Santiago, also will reduce flights and replace unprofitable aircraft in Brazil, where operations probably will shrink 7 percent next year, the newspaper cited Cueto as saying. The airline’s press department confirmed Cueto’s statements in an e-mailed response to questions.

Latam has retreated 18 percent since June 22, when it completed the merger with Tam, underperforming the Ipsa, which dropped 4 percent in the same period of time.

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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