Colombia’s Avianca obtains US$1.6 billion pledge to emerge from bankruptcy

RIO DE JANEIRO, BRAZIL – Colombian airline Avianca obtained financial commitments for US$1.6 billion to finance its exit from Chapter 11 U.S. bankruptcy law as part of its reorganization, the company announced Thursday.

“As a result of the continued support of its creditors, Avianca Holdings filed a motion with the Bankruptcy Court seeking approval of the terms of the commitment letters for its US$1.6 billion Chapter 11 exit financing,” the airline said in a statement.

Avianca is the largest airline in Colombia and second largest in Latin America, after LATAM of Chile.

According to Avianca, these commitments will allow it to refinance the loan taken under debtor-in-possession (DIP), which allows a company to remain in possession of property over which a creditor has a security interest and convert it into financing when the company exits Chapter 11.

“This step represents a key milestone in the restructuring plan that the company will file in the coming months to emerge from Chapter 11 successfully,” the company added.

Avianca Holdings filed in May 2020 under U.S. bankruptcy law to initiate a reorganization process due to the negative impact caused by the covid-19 pandemic on airlines.

In October of the same year, a New York court gave the green light to its US$2 billion financing plan structured in two tranches.

Regarding the US$1.6 billion secured commitment, Avianca indicated that it includes a group of financiers and current DIP creditors for US$1.05 billion in loans, called new Tranche A-1, while the second, called new Tranche A-2, is for US$550 million from other financiers.

Avianca Holdings comprises the airlines Avianca and Tampa Cargo (Colombia), Aerogal (Ecuador), and the Taca International Airlines Group companies based in Central America and Peru.

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