Avianca Holdings has reached an agreement with United Airlines and Kingsland Holdings regarding the terms of United and Kingsland’s proposed financing to Avianca of up to US$250 million and established the conditions precedent to the transaction.
United and Kingsland have agreed to provide Avianca a four-year loan at an interest rate of 3%; interest will be paid-in-kind until maturity, granting Avianca greater financial flexibility. The loan will convert into shares at Avianca’s option –at an equivalent price per share of US$ 4.6217, representing a 35% premium over the 90-day weighted average price through October 3, 2019– subject to certain conditions, including AVH’s share price consistently trading above seven dollars; the loan may also be converted into shares voluntarily at the discretion of United Airlines and Kingsland Holdings.
The financing will be secured by a pledge of stock in Avianca Holdings’ major subsidiaries.
Drafting of final documentation is ongoing and is expected to be executed by mid-October. Funding remains subject to certain other conditions, including the successful conclusion of Avianca’s debt reprofiling plan in a manner consistent with the Avianca 2021 plan, as well as the closing of the company’s exchange offer for its US$550 million 2020 bond.
“United congratulates Avianca Holdings on this important step in its Avianca 2021 plan. We look forward to Avianca’s successful achievement of agreements with its other stakeholders, and to working together with Avianca to complete final documentation for our loan,” said John Gebo, United’s senior vice president of Alliances.
“We are extremely pleased to have reached an agreement with Avianca Holdings on the terms of this facility,” said Roberto Kriete, Chairman of Kingsland Holdings. “We look forward to the successful conclusion of the company’s debt reprofiling initiative, and working with management to support the success of the Avianca 2021 plan.”
The CFO of Avianca Holdings, Adrian Neuhauser stated:
“This agreement represents another crucial step in the financial execution of our Avianca 2021 plan, building on the success we have achieved to date in the bond exchange offer. We believe the terms we have agreed to are very attractive, and we are grateful for the confidence United and Kingsland continue to place in the company and its management.”
Avianca continues to work on quickly finalizing negotiations with its creditors and fulfilling the conditions necessary to conclude the bond exchange offer, in order to expeditiously close the stakeholder loan.
Once this process is concluded, Avianca expects to offer its preferred shareholders the opportunity to participate in US$125 million financing under similar conditions.