In a plan that Avianca has proposed to exit bankruptcy, current company debt, including debtor-in-possession financing would be converted to equity shares in a reorganized holding company, taking precedence over, and thus wiping out any residual value in shares of the bankrupt holding company. In other words, the new lenders would become the shareholders and existing shareholders would get nothing.

“As a result of the foregoing, under the Chapter 11 plan, the value of the shares of the Company would be reduced to zero, due to the decrease in equity of the Company attributable to the Debtors’ liabilities to third parties and creditors, as well as the injection of capital by new investors pursuant to the Chapter 11 plan.”

A US federal judge has a hearing scheduled to assess the proposal on September 14. Avianca’s 6K filing dated September 1 follows below.

In the context of Avianca Holdings S.A.’s (“Avianca” or the “Company”) Chapter 11 proceedings, on September 1, 2021, the Company, as debtor-in-possession (“DIP”), intends to file a motion with the Bankruptcy Court (the “Court”) seeking approval of the terms of, and the Company’s entry into and performance under, an Equity Conversion and Commitment Agreement (the “ECCA”), dated September 1, 2021, by and among the Company, certain of its subsidiaries and a majority of Avianca’s “Tranche B” Lenders under the Company’s outstanding DIP Credit Agreement (the “Supporting Tranche B Lenders”). The terms of the ECCA provide for the potential conversion of approximately $900 million in Tranche B DIP obligations into equity in a reorganized new holding entity of the Companies (as defined below) and the contribution by the Supporting Tranche B Lenders of $200 million of additional capital in exchange for equity in such reorganized entity upon the satisfaction of certain conditions.

Following a competitive marketing process for exit financing, the Company’s management decided (in consultation with certain stakeholders) to refinance Tranche A of its previously outstanding DIP facility with New Tranche A-1 DIP/Exit Loans and New Tranche A-2 DIP/Exit Loans (as disclosed to the market on July 22, 2021) and to move forward in its negotiations with its Tranche B lenders. The ECCA, which remains subject to final approval by the Court, evidences Avianca’s decision to elect the conversion option under its DIP credit agreement and is the result of such negotiations with the Supporting Tranche B Lenders.

Further to our disclosures to the market on May 20, 2020, April 14, 2021 and July 22, 2021, although the Supporting Tranche B Lenders have executed the ECCA, the ECCA remains subject to approval by the Court and to the satisfaction of certain other conditions. Accordingly, at this stage of the process, it is still not possible to know (i) if third parties, creditors or shareholders will contribute new capital, or if the value of the shares of the Company (ordinary and/or preferred) will be diluted and, to the extent such is the case, the extent of such dilution; or (ii) if the Company or any of its affiliated debtors in the Chapter 11 proceedings (the “Debtors”) will be liquidated. In any event, U.S. law imposes upon the Debtors a priority order (known as the “absolute priority rule”) to pay claims existing before the restructuring proceeding filing date. Generally, the value of the Debtors must be directed (i) first, to satisfy secured claims, up to the value of the collateral securing such claims; (ii) second, to satisfy unsecured priority claims; (iii) third, to satisfy non-priority unsecured claims; and (iv) fourth, to shareholders of the Debtors. Generally, a particular class of claims may not receive any distribution until all claims senior to such class have been paid in full. If the Court confirms a plan of reorganization on terms consistent with the ECCA, the Company’s shareholders (including ordinary shareholders and preferred shareholders) will not receive any distribution. As a result of the foregoing, under the Chapter 11 plan, the value of the shares of the Company would be reduced to zero, due to the decrease in equity of the Company attributable to the Debtors’ liabilities to third parties and creditors, as well as the injection of capital by new investors pursuant to the Chapter 11 plan.

In addition to the filing described above, on August 31, 2021, the Company filed with the Court two additional exhibits to the disclosure statement that the Company has proposed to distribute to voting creditors in connection with its Chapter 11 plan of reorganization (the “Disclosure Statement”). These exhibits, customary for reorganization proceedings under Chapter 11, are Exhibit C and Exhibit D. The proposed Disclosure Statement was previously filed at Docket No. 1983. All filings in the Chapter 11 proceedings are available at https://www.kccllc.net/avianca/document/list/5155.

The next step in the Chapter 11 process will be a hearing for the Court to consider the approval of the Disclosure Statement and the solicitation of the Company’s Plan of Reorganization. This hearing is currently scheduled for September 14, 2021.

The Company is currently not soliciting votes on its Plan of Reorganization and will not solicit votes on its Plan of Reorganization until the Court approves the Disclosure Statement and the solicitation of the Company’s Plan of Reorganization. Any relevant information in the Chapter 11 process will be disclosed to the market in a timely manner.

Additional Information about the Company is available on Avianca Holdings’ website www.aviancaholdings.com.

“This filing of the plan represents an important milestone as we continue toward the successful completion of our financial and operational restructuring. The company has made significant progress in repositioning and simplifying the business with the adoption of more competitive pricing for passengers, continuing our aircraft reconfiguration process, expanding our network routes both domestically and internationally – establishing Avianca as the most robust airline in Latin America – securing long-term labor agreements and strengthening relationships with pilots and other employee groups,” said Avianca in a statement.

The next step in the Chapter 11 process will be a hearing for the United States Bankruptcy Court to consider the approval of the disclosure statement, which is scheduled for September 14, 2021. Avianca says it is currently not soliciting votes on its plan of reorganization and will not solicit votes on its plan until the bankruptcy court approves the disclosure statement.

“Any relevant information in the Chapter 11 process will be disclosed to the market in a timely manner. Avianca remains committed to connecting people, territories and businesses under a value proposition that meets the needs of today’s passenger, with the best customer service and the highest safety standards. Avianca will continue building on our 100-year legacy to emerge as a financially stronger, more efficient airline, well positioned for long-term success,” said the airline.

—————————————————————————————–––		x
		:
In re:		:		Chapter 11
		:
AVIANCA HOLDINGS S.A. et al.,1		:		Case No. 20-11133 (MG)
		:
Debtors.		:		(Jointly Administered)
		:
—————————————————————————————–––		x

NOTICE OF HEARING ON DEBTORS’ MOTION FOR ENTRY OF AN ORDER (I) APPROVING THE DISCLOSURE STATEMENT; (II) APPROVING SOLICITATION AND VOTING PROCEDURES; (III) APPROVING FORMS OF BALLOTS; (IV) ESTABLISHING PROCEDURES FOR ALLOWING CERTAIN CLAIMS FOR VOTING PURPOSES; (V) SCHEDULING A CONFIRMATION HEARING; AND (VI) ESTABLISHING NOTICE AND OBJECTION PROCEDURES

1

The Debtors in these chapter 11 cases (the “Chapter 11 Cases”), and each Debtor’s federal tax identification number (to the extent applicable), are as follows: Avianca Holdings S.A. (N/A); Aero Transporte de Carga Unión, S.A. de C.V. (N/A); Aeroinversiones de Honduras, S.A. (N/A); Aerovías del Continente Americano S.A. Avianca (N/A); Airlease Holdings One Ltd. (N/A); America Central (Canada) Corp. (00-1071563); America Central Corp. (65-0444665); AV International Holdco S.A. (N/A); AV International Holdings S.A. (N/A); AV International Investments S.A. (N/A); AV International Ventures S.A. (N/A); AV Investments One Colombia S.A.S. (N/A); AV Investments Two Colombia S.A.S. (N/A); AV Loyalty Bermuda Ltd. (N/A); AV Taca International Holdco S.A. (N/A); Aviacorp Enterprises S.A. (N/A); Avianca Costa Rica S.A. (N/A); Avianca Leasing, LLC (47-2628716); Avianca, Inc. (13-1868573); Avianca-Ecuador S.A. (N/A); Aviaservicios, S.A. (N/A); Aviateca, S.A. (N/A); Avifreight Holding Mexico, S.A.P.I. de C.V. (N/A); C.R. Int’l Enterprises, Inc. (59-2240957); Grupo Taca Holdings Limited (N/A); International Trade Marks Agency Inc. (N/A); Inversiones del Caribe, S.A. (N/A); Isleña de Inversiones, S.A. de C.V. (N/A); Latin Airways Corp. (N/A); Latin Logistics, LLC (41-2187926); Nicaragüense de Aviación, Sociedad Anónima (N/A); Regional Express Américas S.A.S. (N/A); Ronair N.V. (N/A); Servicio Terrestre, Aereo y Rampa S.A. (N/A); Servicios Aeroportuarios Integrados SAI S.A.S. (92-4006439); Taca de Honduras, S.A. de C.V. (N/A); Taca de México, S.A. (N/A); Taca International Airlines S.A. (N/A); Taca S.A. (N/A); Tampa Cargo S.A.S. (N/A); Technical and Training Services, S.A. de C.V. (N/A). The Debtors’ principal offices are located at Avenida Calle 26 # 59 – 15 Bogotá, Colombia.

PLEASE TAKE NOTICE that a hearing (the “Hearing”) will be held at 10:00 AM (prevailing Eastern Time) on September 14, 2021 before the Honorable Martin Glenn, United States Bankruptcy Judge, United States Bankruptcy Court for the Southern District of New York, One Bowling Green, New York, New York 10004 to consider the Debtors’ Motion for Entry of an Order (I) Approving the Disclosure Statement; (II) Approving Solicitation and Voting Procedures; (III) Approving Forms of Ballots; (IV) Establishing Procedures for Allowing Certain Claims for Voting Purposes; (V) Scheduling a Confirmation Hearing; and (VI) Establishing Notice and Objection Procedures (the “Motion”).

PLEASE TAKE FURTHER NOTICE that the Hearing will be conducted remotely via Zoom for Government. Parties wishing to appear at the Hearing, whether in a “live” or “listen only” capacity, must make an electronic appearance through the “eCourtAppearances” tab on the Court’s website (https://www.nysb.uscourts.gov/content/judge-martin-glenn) no later than 4:00 p.m. (prevailing Eastern Time) the business day before the Hearing (the “Appearance Deadline”). Following the Appearance Deadline, the Court will circulate by email the Zoom link to the Hearing to those parties who have made an electronic appearance. Parties wishing to appear at the Hearing must submit an electronic appearance through the Court’s website by the Appearance Deadline and not by emailing or otherwise contacting the Court. Additional information regarding the Court’s Zoom and hearing procedures can be found on the Court’s website.

PLEASE TAKE FURTHER NOTICE that any objections or responses to the relief requested in the Motion shall: (a) be in writing; (b) conform to the Federal Rules of Bankruptcy Procedure, the Local Bankruptcy Rules for the Southern District of New York, all General Orders applicable to chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York, and the Case Management Order; (c) be filed electronically with this Court on the docket of In re Avianca Holdings S.A., Case 20-11133 (MG) by registered users of this Court’s electronic filing system and in accordance with the General Order M-399 (which is available on this Court’s website at https://www.nysb.uscourts.gov) by September 7, 2021, at 4:00 PM (prevailing Eastern Time); and (d) be served on the following parties: (i) the Chambers of the Honorable Martin Glenn, United States Bankruptcy Court for the Southern District of New York, One Bowling Green, New York, NY 10004 (mg.chambers@nysb.uscourts.gov); (ii) the Debtors, Avenida Calle 26 No. 59-15 Bogotá D.C., Colombia (Attn: Richard Galindo (richard.galindo@avianca.com)); (iii) Milbank LLP, 55 Hudson Yards, New York, New York 10001, (Attn: Evan R. Fleck, Esq., Gregory A. Bray, Esq., and Benjamin M. Schak, Esq. (efleck@milbank.com, gbray@milbank.com, and bschak@milbank.com)), counsel for the Debtors; (iv) Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, NY 10019 (Attn: Brett H. Miller, Esq. and Todd M. Goren, Esq. (bmiller@willkie.com and tgoren@willkie.com)), counsel to the Official Committee of Unsecured Creditors (the “Committee”); (v) U.S. Department of Justice, Office of the U.S. Trustee, 201 Varick Street, Room 1006, New York, NY 10014 (Attn: Brian Masumoto, Esq. and Greg Zipes, Esq. (brian.masumoto@usdoj.gov and greg.zipes@usdoj.gov)); (vi) the Securities and Exchange Commission, 100 F Street, NE, Washington, D.C. 20549; and (vii) the Federal Aviation Administration, 800 Independence Ave., S.W. Washington, DC 20591 (Attn: Office of the Chief Counsel).

PLEASE TAKE FURTHER NOTICE that if no objections are timely filed and served with respect to the Motion, the Debtors shall, on or after the objection deadline, submit to the Court an order substantially in the form annexed as Exhibit A to the Motion, which order the court may enter with no further notice or opportunity to be heard.

PLEASE TAKE FURTHER NOTICE that copies of the Motion and other pleadings for subsequent hearings may be obtained free of charge by visiting the KCC website at https://www.kccllc.net/avianca. You may also obtain copies of any pleadings by visiting at https://www.nysb.uscourts.gov in accordance with the procedures and fees set forth therein.

PLEASE TAKE FURTHER NOTICE that your rights may be affected.You should read the Motion carefully and discuss them with your attorney, if you have one. If you do not have an attorney, you may wish to consult with one.

PLEASE TAKE FURTHER NOTICE that the Hearing may be continued or adjourned thereafter from time to time without further notice other than an announcement of the adjourned date or dates at the Hearing or at a later hearing.

Dated: August 10, 2021
New York, New York
				/s/ Evan R. Fleck
				Dennis F. Dunne
				Evan R. Fleck
				Benjamin Schak
				MILBANK LLP
				55 Hudson Yards
				New York, New York 10001
				Telephone:		(212) 530-5000
				Facsimile:		(212) 530-5219
				– and –
				Gregory A. Bray
				MILBANK LLP
				2029 Century Park East, 33rd Floor
				Los Angeles, CA 90067
				Telephone:		(424) 386-4000
				Facsimile:		(213) 629-5063
				Counsel for Debtors and
				Debtors-In-Possession

If you have any questions related to this notice, please call (866) 967-1780 (U.S./Canada), or +1 (310) 751-2680 (International). Court filings and other documents related to the Chapter 11 process in the U.S. are available at www.kccllc.net/avianca.

Si tiene alguna pregunta relacionada con es te aviso, llame al (866) 967-1780 (EE. UU. / Canadá) o al +1 (310) 751-2680 (internacional). Los archivos judicales y otros documentos con el proceso del Capitulo 11 en los EE. UU. Están disponibles en www.kccllc.net/avianca.

]]> https://www.financecolombia.com/avianca-files-reorganization-plan-with-us-bankruptcy-court/feed/ 1 https://www.financecolombia.com/latam-airlines-files-bankruptcy/ https://www.financecolombia.com/latam-airlines-files-bankruptcy/#comments Tue, 26 May 2020 21:54:28 +0000 https://www.financecolombia.com/?p=20517 LATAM Airlines Group S.A. (“LATAM”) (NYSE: LTM; SP IPSA: LTM) and its affiliates in Chile, Peru, Colombia, Ecuador and the United States today filed for Chapter 11 bankruptcy protection in the United States, citing travel restrictions related to the Coronavirus COVID-19 Pandemic. Under US law, a “chapter 11” bankruptcy allows for continued operations under government supervision and negotiation of expense and debt. In certain cases, creditors can still force a liquidation.

“LATAM entered the COVID-19 pandemic as a healthy and profitable airline group, yet exceptional circumstances have led to a collapse in global demand and has not only brought aviation to a virtual standstill, but it has also changed the industry for the foreseeable future,” said Roberto Alvo, Chief Executive Officer of LATAM. “We have implemented a series of difficult measures to mitigate the impact of this unprecedented industry disruption, but ultimately this path represents the best option to lay the right foundation for the future of our airline group. We are looking ahead to a post-COVID-19 future and are focused on transforming our group to adapt to a new and evolving way of flying, with the health and safety of our passengers and employees being paramount.”

Qatar Airways along with the Cueto and Amaro families, all major shareholders, have agreed to provide up to $900 million in debtor-in-possession financing to the airline. To the extent permitted by law, the group says that they would welcome other shareholders interested in participating in this process to provide additional financing. As of the filing, the group had approximately USD$1.3 billion in cash on hand.

LATAM and its affiliates are also in discussions with their respective governments of Chile, Brazil, Colombia and Peru to assist in sourcing additional financing, protect jobs where possible and minimize disruption to its operations. In 2019, the group launched 26 new routes and transported a record 74 million passengers, 5.4 million more than in 2018. The group’s plans for 2020 included further enhancing its passenger experience through cabin transformations and strengthening its strategic partnerships to further connect Latin America with the world.

“Faced with the biggest crisis in the history of aviation, the Board has approved this path forward having analyzed all the available alternatives to ensure the sustainability of the group. As we have adapted to new realities in the past, we are confident that LATAM will be able to succeed in the post-COVID-19 context and continue to serve Latin America, connecting the region with the world,” said Ignacio Cueto, Chairman of LATAM’s Board of Directors. 

LATAM is advised in this process by Cleary Gottlieb Steen & Hamilton LLP and Claro & Cia. as legal advisors, FTI Consulting as financial advisor and PJT Partners as investment banker.

Operational continuity expected

According to the airline:

• LATAM Airlines Group S.A. and its affiliates will continue to operate passenger and cargo flights, subject to demand and travel restrictions.
• All current and future tickets, travel vouchers and frequent flyer miles and benefits, as well as flexibility policies, will be honored.
• The group’s employees will continue to be paid and receive benefits as provided in their employment agreements.
• Suppliers will be paid in a timely fashion for goods and services delivered from May 26, 2020 forward and throughout this process.
• Travel agencies and other commercial partners will experience no disruption in their interactions with the LATAM group.

While most of LATAM’s affiliates are included in the reorganization process, several entities are not, due to the nature of their debt structure and current financial status. A full list of filing entities is available at cases.primeclerk.com/LATAM. The list below summarizes the inclusion of these entities in the Chapter 11 financial reorganization and other proceedings.

Material filing entities:

• Chile: LATAM Airlines Group S.A. and certain other entities incorporated in Chile are included in the Chapter 11 filing and will also file recognition proceedings in Chilean Courts in order to ensure that the Chapter 11 process is given full credit and effect, providing even greater protection to LATAM’s businesses.
• Colombia: LATAM Airlines Colombia and other entities incorporated in Colombia are included in the Chapter 11 filing and will also file recognition proceedings in the Superintendencia de Sociedades in order to ensure that the Chapter 11 process is given full credit and effect, providing even greater protection to LATAM’s businesses.
• Peru: LATAM Airlines Perú and other entities incorporated in Peru are included in the Chapter 11 filing and are also filing a “Preventative Reorganization Process” with INDECOPI in order to ensure to these businesses are further protected from adverse actions of creditors.
• Ecuador: LATAM Airlines Ecuador is included in the Chapter 11 filing.
• United States: All of the group’s operating entities, other than special purpose vehicles, in the United States are included in the Chapter 11 filing.

Non-filing entities

• Argentina, Brazil and Paraguay: LATAM’s affiliates in Argentina, Brazil and Paraguay are not included in the Chapter 11 filing. LATAM’s affiliates in Brazil are in discussions with the Brazilian government about the next steps and financial support for their Brazilian operations.

LATAM Airlines Group group has created a dedicated website: www.LATAMreorganizacion.com, where stakeholders can find additional key information about what this announcement means for them, and also established a hotline for Chapter 11-related inquiries, which can be accessed at (929) 955-3449 or (877) 606-3609 in the U.S. and Canada. International toll-free numbers will be available on www.LATAMreorganizacion.com in the coming days. It also has a dedicated email for inquiries related to the reorganization at lataminfo@primeclerk.com.

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.