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In a new chapter of the process of reorganization of the Colombian airline Avianca in a court in New York, it was known today that it obtained fresh resources that will allow it to replace part of the loan announced by the Government of Colombia for up to US $ 370 million.
According to what was announced, the new financing structure that was presented to the Court for approval in the coming weeks included investments that were already insured for up to US $ 2 billion.
Within these committed investments, what was done now was to leave the option for one or more governments can participate with loan resources of up to US $ 240 million.
Before, in the previous proposal, resources were required from governments of up to US $ 370 million.
In the event that the Government of Colombia decides not to lend the resources, the company, in any case, will continue to advance in its process of obtaining resources within the financing plan, but it could be more difficult to continue in the process. The next step now is for the New York judge to make the decision whether or not to accept the proposed plan.
As is known, on September 11 a A court in Colombia ordered the suspension of the loan that the Government had announced for Avianca.
In a statement, Avianca Holdings announced today that it has obtained commitments, in the amount of slightly more than US $ 2 billion, to provide Debtor in Possession (DIP) financing to the company.
It also filed an application with the United States Bankruptcy Court for the Southern District of New York requesting approval of such financing.
Anko van der Werff, President and CEO of Avianca Holdings, said that “securing these funding commitments is another concrete step in our Chapter 11 reorganization process and we look forward to the Court’s approval of our funding proposal in this regard. DIP ”.
Related: Avianca Moves Forward: Presenting Colombian Financing Before US Bankruptcy Judge
Avianca said that DIP financing – including the refinancing of pre-existing loans and financing of certain acquisitions – is expected to be approximately US $ 2 billion, including a Senior Guaranteed Tranche of US $ 1,270 million and a subordinated Tranche B of US $ 722 million of Dollars.
DIP financing includes approximately US $ 1,217 million of fresh resources, distributed US $ 881 million in Tranche A and US $ 336 million in Tranche B.
Rate Analytics It had anticipated on August 30 that the Government of Colombia – in case of making the disbursement – would be priority in the payments of all creditors and lenders.
On August 28, 2020, as part of the syndication of Tranche A of the DIP, the company entered into a Restructuring Support Agreement (RSA) with an Ad Hoc Group of holders representing the majority of the bonds. Avianca senior guarantee maturing in 2023.
They will provide US $ 290 million of fresh resources (including US $ 63 million of bridge financing) and will refinance, in Tranche A, US $ 220 million of their pre-existing bonds.
One of the most important details of today’s announcement is that, of the total fresh resources of Tranche A (which contains the supply of resources from the Government of Colombia), some US $ 240 million were structured as a bridge or backstop financing, in order to “allow the eventual participation of one or more governments in DIP financing”.
In the case of the Tranche B DIP loan – for a total of US $ 722 million – it is made up of funds provided by Avianca’s pre-existing financiers, including Kingsland Holdings SA and United Airlines, in addition to certain external lenders.
Tranche B consists of US $ 336 million of new resources, and the refinancing of approximately US $ 386 million of previously issued guaranteed convertible debt in December 2019 and January 2020.
The company highlighted that the DIP loan is guaranteed by a set of strategic assets (including Avianca’s stakes in LifeMiles and in its cargo subsidiary, its relevant brands and its cash accounts).
Both tranches are proportionally guaranteed by a lien on all available guarantees, with Tranche B subordinate in right of repayment to Tranche A.
And he highlighted that “the set of guarantees for DIP financing was substantially increased in accordance with the agreements previously announced by Avianca.”
Funding is subject to approval by the Court, whose approval hearing is scheduled for October 5, 2020, among other required conditions.
Seabury Securities LLC serves as Avianca’s investment banking and financial advisor. Goldman Sachs Lending Partners LLC and JPMorgan Chase Bank, NA serve as Lead Coordinators and Bookrunners of Tranche A DIP loans. Milbank LLP is serving as legal advisor.
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