Avianca Holdings secured commitments for debtor-in-possession financing totaling more than $2 billion and filed a motion to approve the financing in the U.S. Bankruptcy Court for the Southern District of New York. Goldman Sachs Lending Partners and JPMorgan Chase are serving as co-lead arrangers.

Anko van der Werff, president and CEO of Avianca, said, “We are extremely pleased with the support received from a large number of third-party institutional investors and our existing lenders. We believe this demonstrates the market’s confidence in Avianca’s future as a strong, competitive and profitable airline. Securing these financing commitments is another concrete step forward in our Chapter 11 reorganization process and we look forward to the U.S. Court approval of our proposed DIP financing package. We have resumed operations in most domestic markets and plan to add more domestic and international destinations in the coming weeks, while we remain focused on refining our reorganization plan to fully address the current industry landscape and the effects of COVID-19, enabling our team to continue driving efficiency and margin expansion and positioning Avianca to successfully serve Latin America’s air travel needs for many years to come.”

The DIP financing – inclusive of rollups of existing debt and purchase loan consideration – is expected to be approximately $ 2.0 billion, consisting of a $ 1.27 billion Tranche A senior loan and a $ 722 million Tranche B subordinated loan. The DIP financing includes approximately $1.217 billion of new funds consisting of $ 881 million in Tranche A and $ 336 million in Tranche B.

On August 28, 2020, as part of syndicating the Tranche A DIP loan, the company entered into a restructuring support agreement with an ad hoc group of holders representing a majority of Avianca’s 2023 senior secured notes who will provide $ 290 million in new funds (inclusive of $ 63 million of backstop) and roll up $ 220 million of their existing notes into Tranche A. $ 240 million of the Tranche A financing has been structured as a backstop commitment, to allow for the eventual participation of one or more governments.

The $ 722 million Tranche B DIP loan includes $336 million of new money financing, as well as a rollup of approximately $ 386 million of secured convertible debt issued in December 2019 and January 2020. The new money financing was provided by certain of the existing convertible debt lenders, including Kingsland Holdings, as well as third-party investors; certain other existing convertible debt lenders, including United Airlines, participated solely in the Tranche B loan rollup by refinancing their Existing Convertible Debt.

The DIP loans are secured by Avianca’s key assets (including the company’s ownership stakes in its LifeMiles and cargo subsidiaries, as well as by its key brands and cash accounts). Both tranches are secured by a lien on all available collateral, with Tranche B subordinated in right of repayment to Tranche A. The collateral pool for these DIP financings was recently substantially increased via a series of agreements previously announced by Avianca.

The financing is subject to U.S. Court approval, with a hearing scheduled for October 5, 2020, and other customary conditions.

Seabury Securities is serving as Avianca’s investment bank and financial advisor. Goldman Sachs Lending Partners and JPMorgan Chase are serving as co-lead arrangers and joint bookrunners of the Tranche A DIP Loans. Milbank LLP is serving as Avianca’s legal advisor.