Avianca Takes $125 Million In Additional Debt From Citadel, Latin American Investors

Avianca’s (NYSE: AVH; BVC: PFAVH) today announced the funding of previously announced convertible secured debt financing in a total amount of $125 million USD. This financing is incremental to the $250 million convertible secured stakeholder facility loan by United Airlines Inc., (NASDAQ: UAL) and an affiliate of Kingsland Holdings Limited that was funded in December, 2019.

Last month Avianca announced that it had obtained commitments for $50 million for convertible loans, on substantially the same economic terms as the Stakeholder Loan, from a group of Latin American investors, and $75 million in commitments for senior secured convertible loans and bonds, which serve as a bridge financing to completion of a contemplated convertible bond offering to preferred shareholders, including a commitment of $50 million from an investment vehicle managed by Citadel Advisors LLC, for senior secured convertible notes, and a commitment of $25 million for senior secured convertible loans from another group of unnamed Latin American investors.

The Latin American Bridge Loan is on substantially the same economic terms as the stakeholder loan, except that any voluntary prepayment by the company—which can occur at the company’s option on the earlier of June 5, 2020 and the date occurring 30 days after issuance of the incremental bonds—will trigger a cash interest payment at 12% per annum over the amount prepaid. The Stakeholder Loans, the Additional Secured Convertible Loans, the LatAm Bridge Loan and the Citadel Notes are secured by the same collateral package that was granted to the lenders under the Stakeholder Loan, consisting mainly of pledges in the equity interests in Avianca group entities and, until the issuance of the Incremental Bonds, certain credit card receivables collateral.

The additional secured convertible loans, the LatAm Bridge Loan and the Citadel Notes were fully funded in stages over last three weeks, concluding on January 10, 2020.

The Incremental Bonds, if and when issued, will be secured by certain credit card receivables of the company and will mature on or after the maturity of the stakeholder loans and the additional secured convertible loans. The remaining terms of the incremental bonds will be determined in due course.

The Citadel Notes will mature in one year with an initial 9% payment-in-kind (PIK) annual interest rate. Upon the issuance of at least $140 million aggregate principal amount of incremental bonds, the annual interest rate on the Citadel Notes will be reduced to 3% PIK, and the Citadel Notes will become optionally pre-payable, at the election of the company, at par. The Citadel Notes are convertible at the election of their holders upon substantially the same terms as the stakeholder loan, at an initial conversion price equal to US$4.6217 per one ADS or eight preferred shares of the company (subject to customary adjustments). The Citadel Notes also will be convertible into Incremental Bonds at the election of their holders upon their initial issuance for identical amounts of aggregate principal amount, up to a maximum of US$50.0 million of Incremental Bonds.

The lenders under the Stakeholder Loans, the Additional Secured Convertible Loans, the LatAm Bridge and Citadel Notes are also subject to an intercreditor agreement governing the enforcement of the collateral securing each such instruments on a pari passu basis, except that Citadel was granted senior rights to the credit card receivables collateral that will, upon the issuance of the Incremental Bonds, be released as collateral from the above described financings and is contemplated to be the sole collateral of the Incremental Bonds. The intercreditor agreement also provides for certain buy-out rights of the Citadel notes by the lenders under the Stakeholder Loans, the Additional Secured Convertible Loans and the LatAm Bridge in the case of the acceleration or non-payment at maturity of such notes.

The lenders under the Stakeholder Loans, the Additional Secured Convertible Loans, the LatAm Bridge and Citadel have been granted customary registration rights regarding the equity

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