Avianca Finalizes Restructuring With Creditor Agreements

(Bloomberg) -- Avianca Holdings SA reached agreements with creditors and secured fresh financing, completing a restructuring of its debt that will free up cash as it pursues a turnaround plan, the Colombian airline said Monday.

The Bogota-based carrier received approval from major creditors with whom it had been negotiating since June, when it began to defer principal payments and announced a “re-profiling” of its debt. The company said it secured extensions of bank lines, letters of credit, and other agreements with more than 125 creditors and suppliers.

It was a critical step in a plan being pursued by Chief Executive Officer Anko van der Werff and Chief Financial Officer Adrian Neuhauser, who took over mid-year. With the agreements finalized, the company received a $250 million loan from stakeholders. It also announced Monday $125 million in additional financing, including a commitment from billionaire Ken Griffin’s Citadel.

“For the 20,000 employees of Avianca Holdings, this is fantastic news, because the distraction of all of this has been an overhang for management attention,” van der Werff said by telephone. “What we can really do now is focus again on the company.”

The management team is putting a plan in place to boost profitability and restore investor confidence by cutting leverage, reducing its fleet size, eliminating unprofitable routes while adding new destinations and focusing on flights through its hub in Bogota. Shares have rallied since they took over, returning 26% in the second half, compared to 5% for Colombia’s benchmark Colcap index.

Bondholders had already agreed to swap notes maturing in May for new bonds. They will automatically receive new notes maturing in 2023 with a 9% coupon by year’s end. The company received a previously announced $250 million convertible loan from United Airlines Inc. and Kingsland Holdings Ltd.

The $125 million in new financing includes $50 million from a group of Latin American investors. Citadel, which agreed to provide $50 million in commitments, said it is supporting Avianca’s transformation plan, according to an email statement from Pablo Salame, head of global credit at the firm.

Avianca is preparing a convertible bond offering of at least $125 million to preferred shareholders in the first quarter of 2020.

“With this funding, it gives us a solid foundation to execute” the business turnaround strategy, van der Werff said. “There’s still lots to do, but you can now focus again on running an airline again.”

To contact the reporter on this story: Ezra Fieser in Bogota at efieser@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Robert Jameson

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