Avianca offers secured notes in exchange for existing 8 3/8% notes

By Wendy Van Sickle

Columbus, Ohio, Aug. 14 – Avianca Holdings SA began an offer to exchange its $550 million existing 8 3/8% senior notes due May 2020 on a par-for-par basis for up to $550 million of new 8 3/8% senior secured exchange notes due May 2020, according to a company news release.

The exchange offer and a concurrent consent solicitation are being made in connection with the company’s re-profiling plan for its capital structure.

The secured exchange notes are intended to provide for automatic conversion on Dec. 31 into an equivalent principal amount of new 9% secured notes upon the closing of an investment of at least $250 million of new equity or convertible debt in Avianca from United Airlines, Inc. and Kingsland Holdings Ltd. and one or more financial institutions.

The new 9% notes will mature on May 10, 2023 and, aside from the coupon and maturity date, will have the same terms as the exchange notes, except that they will be redeemable and the collateral securing the notes will be subject to release if the notes achieve certain ratings.

The exchange notes will have the same coupon and maturity as the unsecured notes. However, the secured notes will have additional guarantors; a cross-acceleration provision will be substituted for the cross-default provision; and United Airlines, Inc. and Kingsland Holdings Ltd will be designated as the permitted holders under the change-of-control provisions.

Additionally, the new exchange notes will be secured by collateral consisting of certain intellectual property, including the Avianca brand, and stock representing the residual value after debt and other liabilities of Avianca’s aircraft fleet.

The new 9% notes will be secured by the same type of collateral as the secured notes.

Concurrently with the exchange offer, the company is soliciting consents to some proposed amendments to the indenture governing the unsecured notes, including the elimination of certain restrictive covenants and other provisions.

In order to receive the full consideration of $1,000 of exchange notes per $1,000 of existing notes, holders must tender their notes by the early deadline, 11:59 p.m. ET on Aug. 27.

The full consideration includes a premium of $50 principal amount of new notes, which will not be paid to holders who tender after the early deadline.

The offer expires at 11:59 p.m. ET on Sept. 11.

Settlement is expected to occur three business days after the offer expires. Any accrued interest will be paid in cash.

The exchange offer and consent solicitation are conditioned on the satisfaction or waiver of certain conditions, including the tender of at least 50.1% of the existing notes.

However, United and Kingsland have informed the company that participation of 50.1% in the exchange offer will not be sufficient for them to consummate the stakeholder investment, according to the news release.

The offer and solicitation are also conditioned on the creation and perfection of a first-priority security interest in the collateral, which is in turn conditioned on the receipt of certain third-party consents, and the satisfaction or waiver of certain other customary conditions.

D.F. King & Co., Inc. (866 796-1291, 212 269-5550 or avianca@dfking.com) is the information agent.

Avianca is a Bogota, Colombia-based airline holding company.

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