Commodities

Colombia's Avianca files bankruptcy financing plan, including convertible loan

Credit: REUTERS/JOSE CABEZAS

Colombian airline Avianca Holdings on Tuesday said it had submitted for court approval a $2 billion bankruptcy financing plan that includes a $700 million convertible loan.

Adds statement from United Airlines

SAO PAULO, Sept 22 (Reuters) - Colombian airline Avianca Holdings AVT_p.CN on Tuesday said it had submitted for court approval a $2 billion bankruptcy financing plan that includes a $700 million convertible loan.

Avianca, Latin America's second largest airline, filed for bankruptcy in May after years of financial struggles that were made worse by the coronavirus pandemic.

In a court filing, it acknowledged it had a hard time obtaining lenders interested in financing the carrier's restructuring.

The convertible loan portion, however, could raise red flags. Rival LATAM Airlines Group LTM.SN, which is also in bankruptcy, had its financing plan rejected earlier this month because a convertible loan portion was seen as too beneficial to current shareholders.

Overall, Avianca's financing plan includes $1.2 billion of new money, of which about a quarter is expected to come from the government of Colombia, where Avianca maintains its largest base of operations. The rest of the loan will be pre-existing debt that has been restructured.

The convertible loan includes the participation of United Airlines Holdings UAL.O, although the U.S. carrier said it is providing no new money, just refinancing old debt.

United has a close relationship commercial relationship with Avianca, although plans to launch a joint business agreement for travel between Latin America and the United States have yet take to take off.

Most of the loan will have an interest rate of 10.5% plus the current LIBOR rate if paid in cash, whereas the convertible loan that includes United will have an interest rate of 14.5% if repaid in cash.

(Reporting by Marcelo Rochabrun; Additional reporting by Tracy Rucinski Editing by Steve Orlofsky and Marguerita Choy)

((marcelo.rochabrun@thomsonreuters.com; +55 11 5644 7768;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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