Avianca’s Top Creditors Revealed, One Small Bank Has Half A Billion USD In Exposure

Avianca Holdings S.A. (NYSE: AVH, BVC: PFAVH) confirmed in a filing with the US Securities & Exchange Commission that the information published on May 11 by newspaper El Tiempo, relating to the bankrupt airline’s five largest creditors is accurate.

One of the motions the air carrier filed in connection with the commencement of its voluntary reorganization proceedings includes a list of its five largest creditors, that includes: the name of each creditor, an estimated amount of such creditor’s claim and a description of the collateral granted, shown below:

Other major creditors called out in the El Tiempo article include Citibank, IAE International Aero Engines AG, Banco Davivienda, General Electric & CFM International, SAP Colombia, Banco Agrícola de El Salvador, Terpel, Lufthansa Group, Banco Cuscatlán de El Salvador, Puma Energy, Microsoft, Chevron Petroleum & Bancolombia.

Fitch Downgrades Avianca’s Issuer Default Rating to ‘D’

Fitch Ratings has downgraded Avianca Holdings S.A.’s (Avianca) Foreign and Local Currency Issuer Default Ratings (IDRs) to ‘D’ from ‘C’. Fitch has affirmed Avianca’s senior unsecured bond issuance at ‘C’/RR6’ and the secured notes at ‘C’. Fitch revised the Recovery Rating of the secured notes to ‘RR6’ from ‘RR4’, reflecting the impact of the coronavirus on the sector and diminished recovery values of aircraft that were used as collateral for the secured bonds.

The downgrades to ‘D’ follow Avianca’s announcement that it has filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. This process will result in material changes in the terms and conditions of its debt. Once the airline exits the administration proceedings, Fitch will assess its new strategy and restructured financial profile and re-rate Avianca accordingly.

Key Ratings Drivers

Voluntary Reorganization Proceedings: Avianca announced on May 10, 2020 that it had filed for bankruptcy protection from its creditors due to liquidity pressure it faces from the Covid-19 pandemic. Avianca did not pay $67 million USD due on its outstanding unsecured bonds on May 10, 2020 and will not pay the coupon payment of its senior secured bonds due 2023.

Covid-19 Lockdown: Avianca has temporarily ceased to operate all regular passenger flight operations due to a decision by several governments to close airspace as of March 25, 2020. The return of operations is still uncertain. Avianca has offered a voluntary unpaid leave program, and around 14,000 employees have accepted this offer. This led to a decline in the company’s revenues by more than 80% and has squeezed its liquidity position. Avianca’s operating cash flow remains highly uncertain for 2020, as it is unknown when the company will be able to restart operations and what restrictions may be placed upon operations at that time.

Wilmington bank images from Twitter.