shares of the company is expected to 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 capital injection by new investors as contemplated by the plan and the ECCA.”

Table A

Date

May 20, 2020

April 14, 2021

July 22, 2021

September 1, 2021

September 14, 2021

September 15, 2021

September 16, 2021

September 17, 2021

September 20, 2021

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.