Avianca Airlines’ parent company (AV, Bogotá), Avianca Holdings, has been cleared by the US bankruptcy court to seek votes from its creditors in the US and Colombia on its proposed restructuring plan.
It was a significant step for the company and its affiliated debtors to exit Chapter 11 bankruptcy protection, the company said in a filing with the United States Securities and Exchange Commission (SEC). .
Following a hearing on September 14, New York’s Southern District bankruptcy court allowed Avianca to release her disclosure statement and solicit votes on the plan from certain categories of creditors. The court also set October 6, 2021 as the date on which it would consider approving the plan. The deadline for creditors to oppose the plan was October 19, 2021.
As previously reported, under the restructuring plan, creditors will be asked to convert USD 935 million of Debtor-in-Operator Loans (DIP) into equity in a new reorganized holding company, as well as USD 200 million of additional capital contributed by participating lenders. under the same tranche (“Tranche B”).
To facilitate this, the bankruptcy court also approved the terms, entering into and execution by the company of the Share Conversion and Commitment Agreement, dated September 1, 2021.
In the SEC filing, Avianca reiterated that once creditors approve the restructuring plan and the bankruptcy court confirms their approval, shareholders (including common and preferred shareholders) will not receive any distribution. As a result, the value of the outstanding shares of the company would be reduced to zero. This would be due to the decrease in the company’s equity due to debtors’ commitments to third parties and creditors, as well as the injection of capital by new investors.
Avianca Holdings SA and some of its subsidiaries and affiliates filed voluntary petitions under Chapter 11 of the US Bankruptcy Code on May 10, 2020.
On August 10, 2021, she filed her reorganization plan and Chapter 11 disclosure statement with the bankruptcy court. The plan – which estimates the airline group could eliminate around $ 3 billion in debt – results from negotiations with investors and other related parties and outlines Avianca’s proposal to make distributions to creditors under pre-bond obligations. -bankruptcy.
The company, in a statement, said it has already made significant progress in repositioning and streamlining its business by:
- Adopt more competitive rates for passengers;
- Continue its process of reconfiguring aircraft;
- Widen the routes of the network both nationally and internationally; and
- Securing long-term employment agreements and strengthening relationships with pilots and other groups of employees.