Avianca has made this announcement:
Avianca Holdings S.A. has successfully renegotiated substantially all of its debt and lease obligations as well as reached agreements with its key suppliers. As a result, the airline was able to complete the funding of USD $250 million in mandatorily convertible loans by United Airlines, Inc. and an affiliate of Kingsland Holdings Limited. In addition, Avianca announced that it has secured an incremental USD $125 million of committed financing.
Completion of the Balance Sheet Reprofiling Program
Avianca successfully reached broad agreement with its creditors last week, allowing it to comply with key conditions precedent for funding of the Convertible Loans by United and Kingsland. In turn, the funding of the Convertible Loans allowed Avianca’s agreements with its creditors to go effective, reprofiling substantially all of its loans and aircraft lease obligations. In addition, funding of the Convertible Loans triggers the automatic exchange of approximately USD $484 millionaggregate principal amount of Avianca’s current May 2020 bonds (the “Secured May 2020 Bonds”) for secured bonds due May 2023 (the “Secured May 2023 Bonds”), under the terms of a previously announced, successfully executed exchange offer for Avianca’s original May 2020 Bonds (the “Unsecured May 2020 Bonds”).
Avianca’s finance team, led by its CFO, Adrian Neuhauser, successfully negotiated with more than 125 creditors and suppliers over the course of the financial reprofiling process launched in late June 2019. In addition to securing extensions of Avianca’s bank lines and letters of credit and ensuring the exchange of over 88.1% of the Unsecured May 2020 Bonds for Secured May 2023bonds, the reprofiling program secured more than USD $250 million of additional cash relief from lessors, aircraft lenders and certain other corporate lenders, substantially strengthening the Company’s liquidity position.
Funding of USD $250 million of Financing
Avianca today received the previously-announced USD $250 million of committed financing from United and Kingsland. This financing consists of USD $250 million of Convertible Loans that mature in four years and with a 3% payment-in-kind (PIK) annual interest rate. United funded USD $150 million and Kingsland funded USD $100 million. United and Kingsland’s Convertible Loans are convertible into the Company’s equity (common shares or preferred shares at the lenders’ option).
The Convertible Loans are subject to mandatory conversion any time after the first anniversary of the loan at the election of Avianca, subject to Avianca meeting certain conditions precedent, including, but not limited to: (i) a trailing six-month average daily ending cash balance (subject to certain adjustments) of at least USD $700 million and (ii) the AVH ADS trading price of at least USD $7.00 for 90 of the prior 120 trading days.
Additional USD $125 million of Financing Commitments
Avianca announced today that, in addition to funding the Convertible Loans, it has secured USD $125 million financing commitments, in all cases subject to the satisfaction of certain closing conditions:
- Avianca secured today USD $50 million in commitments –from a group of Latin American investors– to invest in convertible loans on substantially the same economic terms as the United/Kingsland Convertible Loans. Such loans shall convert into AVH preferred shares or ADRs.
- Avianca also secured USD $75 million in commitments for senior secured convertible loans and bonds that are intended to provide liquidity to Avianca as a bridge to completion of a planned convertible bond offering to preferred shareholders of at least USD $125 million (see details below). These loans and bonds may be converted into AVH preferred shares or ADRs. Citadel will provide USD $50 million of such commitments.
Future Offering to AVH Preferred Shareholders
As previously disclosed, Avianca Holdings expects to offer its preferred shareholders the opportunity to participate in a minimum of USD $125 million of to-be-offered convertible bonds (the “Incremental Bonds”) during the first quarter 2020 under similar conditions to those established for the Convertible Loans, subject to adjustment for market conditions at the time such an offering is launched. Details and timing of such offering will be made available to AVH preferred shareholders, subject to applicable regulatory review and approvals.
Key Stakeholder Support
Anko van der Werff, Avianca’s CEO, commented: “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 of Avianca’s employees for their hard work and dedication, as well as to United and Kingsland for their support throughout this 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.”
Mr. Neuhauser added: “We are grateful for the support of our financial and commercial partners and the confidence they demonstrated by embracing our Company’s reprofiling program. That support has enabled us to reach agreements with all key stakeholders that benefit all parties.
In addition, we are incredibly excited by the fact that, as a result of the successful reprofiling –and of Kingsland and United’s agreement to fund the Convertible Loans– we were able to, in a very short time period, raise incremental commitments for USD $125 million, underscoring the strength of our plan and further bolstering our liquidity.”
John Gebo, Senior Vice President, Alliances for United Airlines, Inc. said: “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 capital 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. We have every confidence they will deliver on the promising outcomes of that Plan, and we wish them and the whole Avianca family every success on that journey.”
Roberto Kriete, President of Kingsland Holdings, stated: “The fact that Avianca’s new management led by Anko and Adrian were able to successfully carry out the reprofiling speaks very highly of their sense of urgency and their execution abilities. It marks a before and after in Avianca’s 2021 Plan. Now with Avianca in a more stable financial position, the airline will be able to focus on the traveler and continue to accelerate its evolution into Latin America’s most beloved and profitable airline.”
Avianca aircraft photo gallery: