Avianca Holdings seeks $1.2bn in fresh DIP financing

Avianca Holdings has outlined its proposed debtor-in-possession (DIP) financing, wherein it aims to raise around USD1.2 billion in fresh capital and increase its stake in its LifeMiles loyalty programme. The airline holding said it had reached conditional agreements with various parties to provide funding for the plan which will require two tranches totalling USD900 million and USD316 million respectively. The first tranche would also include a roll-up of USD220 million in existing commitments, as well as USD168.5 million of debt issued to Advent, LifeMiles’ 30% shareholder. In return for the portion of the debt and an additional USD26.5 million in cash, Avianca Holdings plans to acquire a 19.9% share from Advent with an option to buy the remaining 10.1% in the future. The group already controls the remaining 70% of LifeMiles. “[The transaction] improves Avianca’s future profitability by further aligning the program with Avianca, and eliminating future dividend payments to minority shareholder… These incremental stakes in LifeMiles will also be available as collateral to secure the DIP facility,” it said in an investor proposal. In total, Tranche A of the DIP financing amounts to USD1.29 billion, including new money and rollups. The tranche would be secured by “collateral presently pledged to secure the notes, including Avianca’s trademarks, certain freighter aircraft and Avianca’s residual equity interest in certain pools of aircraft”. Tranche B, in addition to USD316 million in fresh funding, involves around USD384 million in rolled-up commitments. This tranche would be secured by Avianca’s 70% stake in LifeMiles, as well as the carrier’s certain Colombian peso-denominated receivables. “As a result of putting in place these three important agreements, Avianca is now in a position to offer to prospective DIP lending parties a much-enhanced collateral pool of assets to secure such DIP loans. Importantly, each of the foregoing agreements is subject to higher and better offers as Avianca continues to engage in a robust marketing process to secure a financing package on the best available terms,” the group said. Avianca Holdings plans to allocate DIP financing on August 21 and close the funding between September 14 and 18 of this year.