Heidy Monterrosa – [email protected]
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As part of its reorganization process under Chapter 11, Avianca announced that it has reached three important agreements to seek to obtain US $ 1.2 billion of new funds under the debtor-in-possession (DIP) financing structure, since with these the airline will be in a position to offer potential DIP lenders a portfolio of collateral
more robust to back such loans.
One of these is that for Tranche B of Avianca’s DIP financing, funding from its current lenders will be included, as well as new investors, which will consist of US $ 316 million of new funds and US $ 384 million of pre-existing guaranteed convertible debt issued in December 2019 and January 2020. Avianca’s 70% stake in LifeMiles and some credit card acquisitions denominated in Colombian pesos will now be available to secure DIP financing.
Likewise, Avianca reached a preliminary agreement with an ad hoc group of holders of Avianca senior secured bonds due 2023, whose agreement will be documented in a restructuring support agreement between Avianca and the holders of the majority of the bonds. All bondholders will have the opportunity to provide up to US $ 250 million of new resource commitments for Tranche A loans of DIP financing, and certain bondholders will agree to support up to US $ 200 million.
It is worth mentioning that the bondholders that support the restructuring agreement will have the opportunity to have a portion of their bonds refinanced within Tranche A of the DIP financing, up to an aggregate amount of US $ 220 million.
The airline’s third achievement is a preliminary agreement with AI Loyalty Limited, the company that owns 30% of LifeMiles, with which Avianca seeks to acquire 19.9% of the stake in LifeMiles currently held by AI Loyalty through a combination of cash and Loans. DIP of Tranche A. In addition, it seeks to structure a purchase option to acquire the remaining LifeMiles stake in exchange for cash.
With this agreement, Avianca would be the owner of 89.9% of LifeMiles at the closing of the transaction and would be on its way to being the final owner of 100% of LifeMiles. In this way, Avianca’s loyalty company will also be available as a pledge to guarantee DIP financing.
It should be remembered that the DIP financing structure proposed by the airline consists of a senior loan (Tranche A) and a subordinated loan (Tranche B), under which the company seeks to obtain a total of approximately US $ 1,200 million of new funds, excluding the refinancing of pre-existing debts and and possible purchases.
The cumulative total of DIP financing will be US $ 2 billion, consisting of a Tranche A of US $ 1,300 million and a Tranche B of US $ 700 million.
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