Avianca Holdings S.A. has announced that it has secured commitments for debtor-in-possession (“DIP”) financing totaling just over US$2.0 billion and has filed a motion to approve the financing in the U.S. Bankruptcy Court for the Southern District of New York.
The DIP financing – inclusive of rollups of existing debt and purchase loan consideration – is expected to be approximately US$2.0 billion, consisting of a US$1.27 billion Tranche A senior loan and a US$722 million Tranche B subordinated loan. The DIP financing includes approximately US$1.217 billion of new funds consisting of US$ 881 million in Tranche A and US$ 336 million in Tranche B.
On August 28, 2020, as part of syndicating the Tranche A DIP loan, the Company entered into a Restructuring Support Agreement (“RSA”) with an ad hoc group of holders representing a majority of Avianca’s 2023 senior secured notes who will provide US$ 290 million in new funds (inclusive of US$ 63 million of backstop) and roll up US$ 220 million of their existing notes into Tranche A.
US$240 million of the Tranche A financing has been structured as a backstop commitment, to allow for the eventual participation of one or more governments.
The US$722 million Tranche B DIP loan includes US$336 million of new money financing, as well as a rollup of approximately US$386 million of secured convertible debt issued in December 2019 and January 2020 (the “Existing Convertible Debt”). The new money financing was provided by certain of the Existing Convertible Debt lenders, including Kingsland Holdings S.A, as well as third-party investors; certain other Existing Convertible Debt lenders, including United Airlines, participated solely in the Tranche B loan rollup by refinancing their Existing Convertible Debt.
The DIP loans are secured by Avianca’s key assets (including the Company’s ownership stakes in its LifeMiles and cargo subsidiaries, as well as by its key brands and cash accounts). Both tranches are secured by a lien on all available collateral, with Tranche B subordinated in right of repayment to Tranche A. The collateral pool for these DIP financings was recently substantially increased via a series of agreements previously announced by Avianca.
The financing is subject to U.S. Court approval, with a hearing scheduled for October 5, 2020, and other customary conditions.
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