Avianca announced on Monday that they have made substantial progress in restructuring their debt and lease obligations. United Airlines and Kingsland have now funded a previously agreed to $250M commitment.
In their centenary year, Avianca had more good news to report this week as they have secured $375M in new financing as part of their financial restructuring plan. The airline has now restructured most of their debt and lease obligations and United Airlines and Kingsland Holdings have now funded a $250M commitment, which had contingent on the airline meeting financial milestones. United and Kingsland’s investment is secured by a four-year senior secured term loans which are mandatorily convertible to AVH common shares. Avianca has also secured an additional $125M in new financing from the Citadel investment firm and a group of Latin American private investors. Out of the additional $125M in financing, $75M will act as a bridge to the minimum of $125M convertible bonds to be offered to Avianca preferred shareholders in the first quarter of 2020.
The new funding has been possible due to an agreement reached by bondholders to exchange $484M in unsecured bonds due in May 2020 with secured bonds due May 2023, as well as a broad agreement reached by creditors to restructure Avianca’s debt and lease obligations. The $250M in convertible loans from United and Kingsland include a 3% payment-in-kind annual interest rate with United funding $150M of the total and Kingsland the remaining $100M. The mandatory conversion of the loans can occur after the first anniversary of origination at Avianca’s discretion providing the airline maintains an average six-month daily cash balance of $700M and AVH shares have traded at a minimum of $7.00 for 90 of the prior 120 trading days.
In Monday’s announcement, Avianca’s CEO, Anko van der Werff said,
“Today’s announcement coincides with Avianca’s 100-year anniversary and marks an important turning point for our Company as we achieve a critical key milestone of the Avianca 2021 plan. The trust placed in us by our creditors and business partners has enabled us to further execute on that Plan which will strengthen our financial and competitive position. I would like to share my sincere appreciation to all Avianca’s employees for their hard work and dedication, as well as to United and Kingsland for their support throughout the process. We are incredibly excited about the future, and we remain focused on strengthening Avianca’s operating margins by controlling expenses, while exceeding our customers’ service expectations.”
Also commenting on Monday’s announcement, United Airlines’ SVP – Alliances, John Gebo added,
“United Airlines, along with Kingsland, is very pleased to provide this permanent capital financing that enables Avianca to complete a highly successful reprofiling of its capita structure, the exchange of its 2020 bonds, and the securing of commitments for additional financing which, taken together, underpin and support the Avianca 2021 Plan. That Plan calls for a comprehensive transformation of Avianca’s operational and profit performance led by Anko and Adrian [Adrian Neuhauser, Avianca’s CFO]. We have every confidence they will deliver on the promising outcomes of that Plan and wish them and the whole Avianca family every success on their journey.”
Avianca Holdings S.A. has been flying uninterrupted for 100 years and currently serves 76 destinations in the Americas and Europe with a fleet of 175 aircraft. In 2018 the airline transported 30.5M passengers, earning $4.8B in revenue.
Source: Avianca