Avianca seeks banruptcy protection in US court
May 12, 2020 |
Colombian airline says travel restrictions have caused revenues to plummet by more than 80% since mid-March
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Colombian airline Avianca Holdings said it filed for bankruptcy protection under US law after travel restrictions during the coronavirus pandemic caused revenues to plummet for the past two months.
"The filing was necessitated by the unforeseeable impact of the COVID-19 pandemic, which has resulted in a 90% decline in global passenger traffic," Avianca said in a statement on Sunday.
For Avianca itself, consolidated revenue has dropped by more than 80% since it grounded flights in mid-March, it said.
The airline said it will use cash on hand to maintain operations, such as cargo, but it will close its business in in Peru as part of its "right-sizing efforts" to cut costs and focus on its core markets.
Avianca said it hired Seabury Securities and FTI Consulting as financial advisors during the bankruptcy proceedings and Milbank, SGR Law, Gómez Pinzón and UVPA Abogados as legal advisors.
In early April, after Avianca deferred payments on loans and long-term leases to cushion the blow from travel restrictions during the coronavirus pandemic, Fitch Ratings downgraded the airline to C from CCC- and said the default process had begun.
Avianca emerged from a debt restructuring process in December last year when it received a loan for $125 million from US hedge fund Citadel and a group of Latin American investors. In November, it swapped $484 million in outstanding 2020 bonds for new 9% notes that mature in 2023, which freed up a $250 million loan from shareholders United Airlines and Kingsland Holdings.
After the restructuring, Avianca has approximately $50 million in overdue debt and $66 million in bonds that come due this month, according to Fitch. The company's total debt reached $4.9 billion at the end of last year with $1.8 billion in aircraft loans, $1.5 billion in corporate debt, $500 million in cross-border bonds and $1.2 billion in leases.
Avianca's cash holdings came to $398 million at the end of 2019, compared to $872 million in short-term debt, including $237 million in lease agreements, according to Fitch.