Avianca seeks approval for plan that cuts airline’s debt by $3b

Bloomberg

Avianca Holdings SA asked a judge for permission to exit bankruptcy under a plan that the airline says will eliminate about $3 billion in debt and preserve over 10,000 jobs.
Latin America’s second-largest airline before the
pandemic presented its restructuring plan at a hearing in New York. If approved, the 102-year-old company is eyeing an exit from bankruptcy this year.
US Bankruptcy Judge Martin Glenn appeared to side with the company when a handful of objectors claimed the proposal wrongly favoured some creditors over others.
Glenn asked the objecting creditors to file court papers by Thursday listing facts related to their complaints. He did not say when he would decide whether to approve the plan.
The company said it plans to exit bankruptcy soon after winning final court approval. “We remain focused on moving forward with this process as efficiently as possible,” Avianca said.
Under the plan, Avianca will roll over roughly $1.6 billion of loans it raised during the bankruptcy process and raise $200 million of new equity, according to a regulatory filing.
Certain lenders and noteholders including United Airlines, Kingsland Holdings, which is controlled by Salvadoran mogul Roberto Jose Kriete Avila, and Citadel LLC, the hedge fund founded by billionaire Ken Griffin, will get 72% of the airline’s equity in exchange for cancelling more than $900 million of debt, according to court papers.
Avianca filed for Chapter 11 protection in May 2020, after Colombia and other Latin American governments sealed borders and restricted flights in an attempt to control the spread of the coronavirus. Air traffic has slowly rebounded, but remains below pre-pandemic levels, forcing the airline to reduce the number of passenger aircraft it operates from around 147 to below 100 last month, according to a company presentation.
The company will be emerging from bankruptcy into a market still battered by the effects of the pandemic and government travel restrictions. Latin American carriers are projected to post cumulative losses of $5.6 billion this year and $3.7 billion in 2022, according to the IATA.
It plans to gradually add
more destinations and aircraft, flying cost-efficient narrow-body planes with more seats to compete with low-cost carriers. Under an eight-year financial forecast it published in August, Avianca expects to post a pretax profit in 2023 and for net debt-to-Ebitda ratio to fall to 3.6 times from 5.1 times next year.
Avianca is among the largest and oldest of the region’s airlines, tracing its roots to 1919 when it was founded as SCAD.