Colombian Government Study To Explore $370 Million USD Loan To Bankrupt Avianca Contracted Just 1 Day Before Loan Approved; To Be Paid By Avianca

Finance Colombia has learned that a feasibility study to determine the viability of a government bailout of Avianca Airlines, where Colombian President Ivan Duque’s sister Maria Paula Duque is a top executive, was contracted by the finance ministry only the day before Duque announced the $370 million USD package as a fait accomplí…but to be paid for by Avianca.

The contract, with the US law firm Arnold & Porter Kaye Scholer LLP was executed to, under the clause (original document below): B) PRODUCTS OF THE CONTRACTOR recommendation document (translated):

1. “Legal analysis of the participation of the government of Colombia as “Debtor in Possession (DIP) in the bankruptcy case of Avianca Holdings S.A. presented in the bankruptcy court of the United States, Southern District of New York under the Chapter 11 Bankruptcy Code. The document will contain the following:
   1. Report on the restructuring process and mechanisms of protection of the interests of the nation during the process.
   2. Analysis of proposed financing i. Possibility of recuperation for the public resources invested in whatever financing structure.”

In other words, the analysis of the proposed financing was ordered only the day before the financing was announced by the president. Further, the financing is to be paid for by Avianca—not by the government. Clearly the political decision to fund the airline was made before any study by the law firm could be done.

Earlier in the year, Colombian President Ivan Duque said that any help for the airline industry, impacted by the Coronavirus COVID-19 Pandemic would be handled equitably. While Panamá-domiciled Avianca markets itself as a Colombian airline, and Duque’s sister is a top executive there, Bankrupt LATAM Airline’s Colombian subsidiary, and Colombian domestic airline EasyFly, also in bankruptcy have appealed for help without a definite response from the Duque administration.

Colombian low-cost carrier Viva Air is in much better financial shape than the others and has asked for a bridge-financing package from the government, but like every other airline except Avianca, has also gotten the cold-shoulder from Duque.

Finance Colombia reached out to Avianca executives for comment on this article but received no response by publication.

Above Photo: Juan Guillermo Moncaleano ANI (courtesy Ministerio de Transporte)