The Panamanian/Colombian carrier has decided to move its domicile to the United Kingdom and become a UK-incorporated company. The announcement follows a U.S. court's approval of the airline’s restructuring plan last Tuesday, 02NOV21. Avianca did not disclose why it is translocating its home from Latin America to overseas and applying for a British registration.
In a release published in Bogotá on 03NOV21, Avianca Holdings S.A. confirmed its intention to shift its domicile from Latin America to Great Britain. The statement follows a decision by the U.S.
court of the Southern District of New York, okaying the company's reorganization plan.
Change of name
This ruling was precondition to allowing the airline, which had applied for creditor protection 2020 in the USA (Chapter 11), to move its domicile overseas. Prior to that, the Latin American carrier had handed over urgently requested key documents to the judges. The court-approved restructuring of the airline also means the green light for the relocation of its address to the UK. According to court documents, lenders and noteholders who agreed to refinance their debt at the beginning of Avianca’s bankruptcy case last year, will get 72% of the airline’s equity in exchange for canceling about US$934.7 million.
Once the legal formalities of the intended step are accomplished, Avianca Holdings will be terminated and will “emerge as a new company” under the name Avianca Group International Ltd., the management announced. This implies that Avianca Group Int'l will take control of the entire current airline structure, while maintaining the same corporate name as the Panamanian company.
Like a Phoenix
But why move its address to the UK? There is no news on this from Bogotá since both management and creditors remain tight-lipped. Market experts indicate that the intended transition of domicile will allow Avianca to save taxes and reduce its debt following its forthcoming Chapter 11 exit in the USA before the end of this year. Financial liabilities will be significantly reduced, and monetary restrictions demanded by Chapter 11 will belong to the past. Come end of 2021, Avianca will have US$1 billion in liquidity after it repays $1.4 billion in bankruptcy loans, the company confirms. During the bankruptcy process, Avianca received around $2 billion in new financing.
“This is reminiscent of the rise of the Phoenix from the ashes,” commented a voice close to the case. However, its current shareholders will have to bite the bullet since they will not receive any payout nor be included as shareholders in the new Avianca Group International Ltd., the management confirmed.
No stock exchange listing anymore
Next, the airline intends to cancel its registrations on the NYC and Colombian stock exchanges and will not be listed at any stock exchange for the next couple of years, an announcement reads.
Avianca, along with rival Chile's LATAM Airlines, were the two largest carriers in Latin America before the outbreak of the COVID-19 pandemic, but both were sent into bankruptcy-restructuring when the virus brought air travel to a virtual standstill amid especially strict restrictions in Latin America. Prior to that, Avianca had already posted several years of losses before the pandemic broke out, and went through a boardroom coup in 2019, led by partner, United Airlines.
According to the management, Avianca calculates with 130 aircraft servicing nearly 200 routes by 2025: among them, freighters complementing the passenger fleet.
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