Avianca to Seek $1.8 Billion With Bankruptcy Exit in Sight

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Avianca Holdings SA plans to raise $1.8 billion to repay debt and provide new financing as the Colombian airline eyes an exit from the bankruptcy reorganization it was forced into last year during the pandemic-driven travel collapse.

The air carrier retained Seabury Securities LLC to help raise the exit financing, likely a combination of debt and equity, the company said in a regulatory filing Wednesday. Avianca said it will repay $1.4 billion in bankruptcy loans and have around $1 billion in liquidity when it emerges from the reorganization at some point this year.

Avianca was Latin America’s second-largest airline before the Covid-19 pandemic slowed air travel to a trickle last year, leading it to file for Chapter 11 protection in a New York court in May. Latam Airlines Group SA and Mexico’s Grupo Aeromexico SAB also were forced into bankruptcy as the region suffered one of the world’s sharpest drops in flights.

In addition to the $1.4 billion in loans it plans to refinance, Avianca raised $900 million from a group of investors including United Airlines, hedge fund Citadel Advisors LLC and Salvadoran air mogul Roberto Kriete. The company is negotiating final terms to convert that tranche into equity as it builds its new capital structure. It’s “still not possible to know” whether the value of existing shares will be diluted, according to the filing.

When it emerges, Avianca signaled that its costs will be cut drastically. It said some 300 initiatives will save $500 million annually, helping cut leverage to below three times Ebitda from 5.8 times as of the end of 2019.

The case is Avianca Inc., 20-11133, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).

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