Avianca Holdings, the Panama-based parent of avianca airlines, plans to raise USD1.8 billion either in debt or fresh equity as exit financing to conclude its Chapter 11 proceedings.
The holding said in an SEC filing that USD1.4 billion would be used to refinance Tranche A of the debtor-in-possession (DIP) financing the holding received last year. At that time, the tranche provided USD1.27 billion in fresh capital to the airline from around 100 undisclosed lenders.
The remaining USD400 million will go towards a USD1 billion cash pile Avianca Holdings hopes to have as it emerges from Chapter 11. The funding will be subject to US Bankruptcy Court approval.
The holding has retained Seabury Securities as financial and restructuring advisor to help negotiate the funding terms. It did not provide any further details about its potential shape or form.
Avianca Holdings said it was separately negotiating the conversion of a subordinated DIP financing Tranche B, currently worth USD902 million in obligations, into equity.
The holding also provided an update regarding its cost-cutting measures, which it estimates will eventually bring over USD500 million in annual savings and reduce passenger unit cost (CASK) excluding fuel by 38% compared to 2019 levels. Avianca Holdings said that most of the measures had already been implemented or were in the process of implementation, with the remainder due for execution in 2021-2022.
"Avianca is well along in its fleet simplification and cost reduction program, which it believes will result in an overall reduction of more than US$2.0 billion in aircraft debt and lease obligations during the period from March 2020 through December 31, 2022, on an IFRS-16 basis, and an expected average of over 35% reduction in individual aircraft capital costs," the holding added.
Avianca Holdings did not provide a specific date for its planned exit from Chapter 11 restructuring but said it would be in 2021.
