FOLLOW US

WOM SA, a Chilean mobile phone operator, has received approval from a Delaware bankruptcy court for its $500 million restructuring plan, marking a significant step in its efforts to address $650 million in debt. U.S. Bankruptcy Judge Karen B. Owens found that the debtor demonstrated sound business judgment in selecting the framework, which includes a significant equity transfer and a rights offering.

Key Details of the Restructuring Plan

The approved plan sponsor agreement outlines a deal in which a group of unsecured noteholders will backstop a $500 million rights offering, taking on a majority stake in the reorganized WOM. The transaction includes:

• $95 million in new secured notes.
• 92% of equity in the reorganized WOM in exchange for up to $405 million.

The plan will allow WOM to emerge from bankruptcy with reduced debt and funding for its ongoing 5G network expansion.

"This plan establishes a clear path to deleveraging our balance sheet, fully funding our business plan, including the remainder of our 5G buildout, and offering meaningful recoveries to all unsecured creditors," said Martín Vaca Narvaja, WOM Chile CEO.

Overcoming Legal Hurdles

Prior to Friday's hearing, WOM resolved multiple objections to the plan:

• The U.S. Trustee’s Office withdrew its challenge after WOM agreed to eliminate a $62.5 million break-up fee if regulatory approval for the deal fails.
• The unsecured creditors committee dropped its objections following the noteholder group’s commitment to increase cash recoveries for committee members by $2.5 million, raising the total to $72.5 million.

Judge Owens noted that the agreements demonstrated sound business judgment and paved the way for WOM to move forward with its reorganization plan.

Background and Context

WOM filed for Chapter 11 bankruptcy protection on April 1, citing over $1 billion in debt, delays in its 5G expansion project, and credit downgrades that strained its liquidity. The filing aimed to prevent liquidation under Chilean law and secure new funding sources. WOM’s liabilities included $120 million in overdue payments to trade creditors.

The restructuring will enable WOM to substantially reduce its debt burden while maintaining operations and completing its 5G network buildout.