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Avianca Holdings affirmed this Sunday that the 370 million dollar loan approved by the Government, criticized by the opposition, is equivalent to 30% of the new resources of its financial restructuring plan and is a sign of confidence in the company.
(In context: Government enters to support restructuring of Avianca Holdings)
The Ministry of Finance announced on Saturday that the management committee of the Emergency Mitigation Fund (FOME), which manages resources to face the coronavirus pandemic, approved the loan to Avianca, under the figure of debtor in possession (DIP), in order to preserve the national air service.
“We are pleased with the announcement by the Government of Colombia regarding its participation in the company’s DIP financing and we express our appreciation for the trust and support that this loan shows,” Avianca Holdings said in a statement.
Avianca filed for bankruptcy in the United States last May to initiate a process of financial reorganization due to the negative impact of the covid-19 crisis.
(Also read: Avianca Holdings turns on the engines of domestic flights)
18-month loan with guarantees
The company explained that the loan is an 18-month transaction and is part of an operation led by private market investors.
According to the company, Avianca’s DIP financing consists of two tranches that will add approximately 1,200 million new funds, as part of a total financing package of $ 2 billion, including the financing of “certain acquisitions and the refinancing of certain pre-existing debts.”
The company said it will back the DIP loan with “a set of Avianca’s strategic assets as collateral,” including its stake in LifeMiles, its cargo and cash account subsidiary, among others.
“In addition to the credit approved by the FOME (…) we are pleased with the positive reception that the DIP loan structure has received from external institutional investors”Avianca Holdings added.
(It may interest you: The air routes that would be reactivated in Colombia from September)
Criticism of the operation
However, the loan has been highly criticized by different sectors that consider that the Government of President Iván Duque It should invest these resources in thousands of small companies that, like the airline, suffer millions in losses due to the economic paralysis caused by the pandemic.
“According to 300 experts from the richest countries in the world interviewed by (American economist Joseph) Stiglitz, the worst policy that can be done in the world is to save airlines. It does not create jobs and it does cause an exacerbation of the climate crisis. instead of Avianca the mipymes, Duque, “said left-wing senator Gustavo Petro on his Twitter account.
Another senator, Iván Marulanda, from the Green Party, stated that “with the delivery of public money to the Avianca company, the Duque Government challenges the Colombian people.”
The opposition further announced that will summon Finance Minister Alberto Carrasquilla to a political control debate in Congress to explain the reasons for the loan.
(Also: Avianca obtains biosafety certifications in Colombia)
Government reasons
To grant the loan, the Colombian government took into account that Avianca is the largest airline in the country, with a 45.5% share in the market for passengers transported in 2019, according to the Ministry of Finance.
Avianca Holdings generates more than 21,000 direct and indirect jobs in Latin America, of which more than 14,000 are in Colombia, and it works with a network of more than 3,000 suppliers.
The airline has a 31.6% participation in the country’s cargo transport and its operation represents approximately 14.6 billion pesos (about 3,899 million dollars) per year for the Colombian economy, equivalent to 1.4% of the Product Gross Domestic (GDP).
The airline’s operations are integrated into Avianca Holdings, formed by the airlines Avianca and Tampa Cargo (Colombia), Aerogal (Ecuador) and the companies of the Taca Internacional Airlines Group based in Central America and Peru.
EFE
