Avianca Closes On $250 Million Convertible Loan From United Airlines & Kingsland International Group

Avianca has announced this morning in a filing with the US Securities & Exchange Commission (SEC) that it has closed on a $250 Million senior secured convertible loan agreement offered by US based United Airlines, and Kingsland International Group, controlled by Roberto Kriete of El Salvador.

Terms of the loan are as follows (taken from the SEC filing):

Use of Proceeds – Working capital and general corporate purposes, after repaying all obligations under Avianca’s existing $50 million loan from Kingsland (the “Kingsland Loan”).

Conversion Price – $4.6217 per ADS, representing a 35% premium to the 90-day volume-weighted average price, through October 3, 2019, of $3.4235. Following the occurrence of a change of control of Avianca, the conversion price will be reduced to $4.1595.

Maturity – Four years from the date of funding.

Interest – 3% per annum PIK.

Security – A pledge of capital stock in Avianca’s major subsidiaries.

Mandatory Conversion – Avianca may require that the outstanding principal amount of the Convertible Loan, together with all PIK and accrued cash interest thereon, be converted into Avianca’s equity upon the satisfaction of the following conditions: (i)(a) Avianca’s ADSs trading at or above $7.00 on a volume-weighted average price basis for 112 of 150 consecutive business days (if such conversion occurs on or prior to the first anniversary of the funding of the Convertible Loan) or (b) Avianca’s ADSs trading at or above $7.00 on a volume-weighted average price basis for 90 of 120 consecutive business days (if such conversion occurs after the first anniversary of the funding of the Convertible Loan); (ii) Avianca’s consolidated average total cash balance being equal to or greater than $700 million over the immediately preceding six-month period; (iii) the non-existence of defaults under the Convertible Loan documentation; and (iv) the non-existence of material litigation.

Conditions Precedent to Funding: Including, but not limited to: (i) obtaining necessary consents for granting collateral interests; (ii) successfully completing Avianca’s previously announced re-profiling plan, including obtaining all necessary waivers and consents, as an integral part of Avianca’s $2.6 billion liquidity program and profit turnaround (the “Avianca 2021 Plan”); (iii) reducing Avianca’s fleet and new aircraft orders (and major maintenance agreements) compatible with Avianca 2021 Plan; (iv) successfully completing Avianca’s previously announced exchange offer for its 8.375% Senior Notes due 2020 for new 8.375% Senior Secured Notes due 2020 with participation therein of at least 85% of the outstanding aggregate principal amount of Avianca’s currently issued and outstanding 8.375% Senior Notes (which occurred on November 1, 2019); (v) adopting and implementing cost reduction initiatives consistent with the Avianca 2021 Plan and satisfactory to the lenders; and (vi) having a total cash balance of not less than $550 million after giving effect to, among other things, the funding of $250 million of the Convertible Loan and the repayment of the Kingsland Loan.