Latam Airlines Judge Denies $2.45 Billion Bankruptcy Loan (1)

U.S. Bankruptcy Judge James Garrity Jr. on Thursday blocked Latam Airlines Group SA from accessing as much as $2.45 billion of proposed bankruptcy financing.

The credit agreement flouted bankruptcy rules, according to a ruling by Garrity, because it would have let Latam convert $900 million of the debt into new stock. That runs afoul of legal procedures that let creditors vote on the way a bankrupt company repays its obligations, he said.

Oaktree Capital Management was set to provide Latam with more than $1 billion of financing, while the $900 million portion would have come from Qatar Airways and Chile’s ...