720B
Topic Author
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Avianca majority shareholder breaches United loan conditions

Tue Apr 30, 2019 10:04 pm

As per flightglobal, Avianca majority shareholder breached United loan conditions. Wonder if this could open the door to United controlling Avianca.

https://www.flightglobal.com/news/artic ... co-457770/
 
SonaSounds
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Re: Avianca majority shareholder breaches United loan conditions

Tue Apr 30, 2019 10:10 pm

Unlikely UA will act on this but interesting none the less.
 
dmorbust
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Joined: Thu Feb 21, 2013 11:50 pm

Re: Avianca majority shareholder breaches United loan conditions

Tue Apr 30, 2019 10:17 pm

SonaSounds wrote:
Unlikely UA will act on this but interesting none the less.


I agree, if they wanted to they would have done so prior to us learning about the situation in the media. But just curious - why wouldn't United want to seize control of Avianca? Colombia allows foreign airline ownership.
 
MIflyer12
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Re: Avianca majority shareholder breaches United loan conditions

Tue Apr 30, 2019 10:26 pm

I know Avianca isn't a U.S. firm, but big U.S. firms break loan covenants every day. Negotiations for remedy can stretch out for months to years.
 
AtomicGarden
Posts: 355
Joined: Sun Jun 04, 2017 10:57 pm

Re: Avianca majority shareholder breaches United loan conditions

Tue Apr 30, 2019 10:50 pm

Is Avianca in trouble as much as it's Braziliand and Argentinian branches?
You killed a black astronaut, Cyril! That's like killing a unicorn!
 
OB1504
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Re: Avianca majority shareholder breaches United loan conditions

Tue Apr 30, 2019 11:37 pm

dmorbust wrote:
SonaSounds wrote:
Unlikely UA will act on this but interesting none the less.


I agree, if they wanted to they would have done so prior to us learning about the situation in the media. But just curious - why wouldn't United want to seize control of Avianca? Colombia allows foreign airline ownership.


Given Avianca’s troubles lately, why would United want to control them?
 
Airlines0613
Posts: 142
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 12:05 am

I mean, UA did want a JV with AV. This could be a perfect time for UA to purchase a large, if not a majority, stake. It could significantly improve Latin American connections for UA and AV can be reorganized to make a nice profit. Plus, UA can also lease those Boeing 787/Airbus A320neos.
 
jfk777
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 12:07 am

OB1504 wrote:
dmorbust wrote:
SonaSounds wrote:
Unlikely UA will act on this but interesting none the less.


I agree, if they wanted to they would have done so prior to us learning about the situation in the media. But just curious - why wouldn't United want to seize control of Avianca? Colombia allows foreign airline ownership.


Given Avianca’s troubles lately, why would United want to control them?



Why would United loan them nearly half a billion dollars ? Avianca is an airline that should have died long ago like other Colombian airlines Aerocondor and Aerotol. Avianca has a nice A320 fleet and a dozen 787-8 that ply the Atlantic, JFK and LAX, nothing to get excited about here. AV belongs to the wrong alliance, they should be in Skyteam but are in the Star alliance instead. German Efronowich get credit for "saving" AV and he may be its murderer too.
 
dcajet
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 12:10 am

AtomicGarden wrote:
Is Avianca in trouble as much as it's Braziliand and Argentinian branches?


The short answer is NO. Trouble is with Avianca's largest shareholder, Synergy, (which owns O6 and A0). They have received a loan from United Continental Holdings as part of the latter's association with Avianca and COPA. Synergy has put their Avianca Holdings shares as a collaterar for that loan. So, if Synergy breaks the covenant of the loan, United becomes the largest shareholder at Avianca Holdings.

So it was reported yesterday that BRW, a subsidiary of Synergy for the purposes of this loan, has broken parts of that debt covenant, so this a risk as it could enable United to take action and leave the Efromovichs (Synergy) out of AVH.

https://www.daviviendacorredores.com/wp ... el-20F.pdf

Hope this helps.
"Unattended children will be given espresso and a free kitten"
 
dcajet
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 12:54 am

Image
"Unattended children will be given espresso and a free kitten"
 
AtomicGarden
Posts: 355
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 1:17 am

dcajet wrote:
AtomicGarden wrote:
Is Avianca in trouble as much as it's Braziliand and Argentinian branches?


The short answer is NO. Trouble is with Avianca's largest shareholder, Synergy, (which owns O6 and A0). They have received a loan from United Continental Holdings as part of the latter's association with Avianca and COPA. Synergy has put their Avianca Holdings shares as a collaterar for that loan. So, if Synergy breaks the covenant of the loan, United becomes the largest shareholder at Avianca Holdings.

So it was reported yesterday that BRW, a subsidiary of Synergy for the purposes of this loan, has broken parts of that debt covenant, so this a risk as it could enable United to take action and leave the Efromovichs (Synergy) out of AVH.

https://www.daviviendacorredores.com/wp ... el-20F.pdf

Hope this helps.


Gotcha! thanks
You killed a black astronaut, Cyril! That's like killing a unicorn!
 
RCS763AV
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 2:36 am

As has been said, Avianca is not as in trouble as Synergy's other "Avianca" brand subsidiaries of Synergy. It is Synergy, through the SPV they created to accept the loan from United, that is in default. As Synergy's shares in Avianca Holdings are the collateral to the loan, this means UA has the possibility to become Avianca Holding's largest shareholder.

In the meantime, Avianca is getting the house in order.

(i) They're selling non-strategic assets (regional airlines in Central America, a courier service in Colombia).

(ii) They deferred several airbus orders to regain cashflow, lower future lease payments and as a consequence reduce their debt leverage ratio.

(iii) They are focusing assets on their most profitable routes (increased frequencies to MIA, JFK, EZE and CUN and capacity increases to SCL from BOG, with more changes coming). Unfortunately, this meant some international network cuts from SAL and BOG (mainly recent routes which were in the process of maturing) and the dismantling of the domestic peruvian network with the exception of CUZ.

(iv) They're streamlining their operations with (a) a lower cost base regional subsidiary to operate the ATR 72 in Colombia profitably; (b) selling the E190s which didn't have a clear role in the fleet and (c) soon dismantling business class on domestic and short international sectors, to better compete with LCCs, just as LATAM did a few years ago.

These decisions have partly come from guidance given by UA. Once the company is in a stronger financial position (again, not loosing money, just a cashflow and debt problem) it will go back to growth mode. I hope UA is able to continue helping the board stay away from Efromovich's amateurish/shady business strategies without actually taking control of the company.

I honestly do not think UA is interested in controlling AV, and if Efromovich is a good boy and lets them handle his airline until it's back on track for sustainability, the future will be bright for Avianca Holdings. UA's interest is that the airline stays afloat to have a partner with critical mass for it's JV between the US and LatAm.
 
Wayfarer515
Posts: 701
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 6:44 am

They should bring the Taca management back, and kick the hell out of Efromovich and co., they have destroyed all what TACA took so many years to build in Central America.
What a bunch of bozos.
 
Etheereal
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 11:50 am

AtomicGarden wrote:
Is Avianca in trouble as much as it's Braziliand and Argentinian branches?

Yes.
JetBuddy wrote:
"737 slides off the runway" is the new "Florida man"..

:lol:
 
many321
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 1:14 pm

Wayfarer515 wrote:
They should bring the Taca management back, and kick the hell out of Efromovich and co., they have destroyed all what TACA took so many years to build in Central America.
What a bunch of bozos.


I read recent reports that Volaris Costa Rica wants to become the primary Central America company that TACA was before the Avianca takeover. Perhaps, Kriete should bail on Avianca and partner with Volaris since from what I'm seeing its not looking good for Avianca at the moment.
 
Wayfarer515
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 3:21 pm

many321 wrote:
Wayfarer515 wrote:
They should bring the Taca management back, and kick the hell out of Efromovich and co., they have destroyed all what TACA took so many years to build in Central America.
What a bunch of bozos.


I read recent reports that Volaris Costa Rica wants to become the primary Central America company that TACA was before the Avianca takeover. Perhaps, Kriete should bail on Avianca and partner with Volaris since from what I'm seeing its not looking good for Avianca at the moment.


Isn't Mr.Kriete already a major shareholder of Volaris?
 
dcajet
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 3:49 pm

Wayfarer515 wrote:

Isn't Mr.Kriete already a major shareholder of Volaris?


They were in the beginning; not sure if they still own a % of the shares. Indigo Partners are the majority shareholders these days.
"Unattended children will be given espresso and a free kitten"
 
many321
Posts: 292
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 5:20 pm

Who knows about now, though in 2017, Efromovich was displeased, and that's been charitable with my wording regarding Kriete also being a shareholder at Y4 as written in this article.

https://www.estrategiaynegocios.net/las ... en-avianca

He mentioned that Kriete on various times has wanted to leave AV, and if he wants to, he'll have to pay a high price.

In addition, he was frustrated once Volaris Costa Rica came into fruition and due to that, their stocks went down. Due to this, he accused Kriete of competing against AV.

That's what I'm getting from this article unless I'm mistaken.

Though, if these AV crises rumblings are true, perhaps Kriete might just pay a pretty penny, pull out and focus on Volaris Costa Rica.
 
dc10lover
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 5:56 pm

"As Synergy's shares in Avianca Holdings are the collateral to the loan, this means UA has the possibility to become Avianca Holding's largest shareholder".

United Airlines basically "Purchased" Synergy's shares.
Why endure the nightmare and congestion of LAX when BUR, LGB, ONT & SNA is so much easier to fly in and out of. Same with OAK & SJC when it comes to SFO.
 
User avatar
Aisak
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 6:06 pm

dc10lover wrote:
"As Synergy's shares in Avianca Holdings are the collateral to the loan, this means UA has the possibility to become Avianca Holding's largest shareholder".

United Airlines basically "Purchased" Synergy's shares.

United has not stated they want to exercise that option.
And I would have expressed it the other way around. Synergy has gifted Avianca Holding’s shares, but the change of hands is yet to happen, should United want to...
 
RCS763AV
Posts: 3783
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Re: Avianca majority shareholder breaches United loan conditions

Wed May 01, 2019 6:41 pm

Wayfarer515 wrote:
They should bring the Taca management back, and kick the hell out of Efromovich and co., they have destroyed all what TACA took so many years to build in Central America.
What a bunch of bozos.


I disagree with your statement. Avianca's management are not a bunch of bozos. They managed to transform the airline into a bankrupt, 35 aircraft operation filled with terrible customer service and constant delays to one of Latin America's leading airlines. It is Mr Efromovich that went out of control and took decisions that affected the airline's financial position, as he made it grow too fast and got too much into debt without having actual money to back the debt up.

Also, TACA enjoyed a near monopoly with abusive pricing in Central America. Limited service, capacity constraints and $1200 fares for 45 minute flights were common. Once the market dynamic started changing, more capacity came into the region, CM grew strong and LCCs appeared, they were loosing money big time and rapidly becoming irrelevant as their multiple hub strategy in a small market such as Central America was not working given it entailed a high cost structure which could only be sustained with sky high fares. The best thing that happened to TA was merging with AV, otherwise they were in a path of demise.

Etheereal wrote:
AtomicGarden wrote:
Is Avianca in trouble as much as it's Braziliand and Argentinian branches?

Yes.


I love these one word statements with no context and without reading the actual thread. No, they are not.
 
Etheereal
Posts: 323
Joined: Tue Nov 29, 2016 11:44 am

Re: Avianca majority shareholder breaches United loan conditions

Fri May 03, 2019 1:00 am

RCS763AV wrote:
I love these one word statements with no context and without reading the actual thread. No, they are not.

If you can read spanish, check this article: https://www.eltiempo.com/economia/empre ... nca-354470
JetBuddy wrote:
"737 slides off the runway" is the new "Florida man"..

:lol:
 
RCS763AV
Posts: 3783
Joined: Mon Jun 14, 2004 1:22 am

Re: Avianca majority shareholder breaches United loan conditions

Fri May 03, 2019 4:02 am

Etheereal wrote:
RCS763AV wrote:
I love these one word statements with no context and without reading the actual thread. No, they are not.

If you can read spanish, check this article: https://www.eltiempo.com/economia/empre ... nca-354470


I can, I'm Colombian. I've read the article a couple of times. Nothing in it is saying they are at the brink of collapse, rather that measures are being taken to avoid a possible crisis in the future. Avianca is a profitable company, just just too indebted. Measures to reduce that debt and lower costs are being taken to ensure its sustainability. That is it.

Avianca Brasil and Avianca Argentina were never profitable ventures. Avianca Brasil grew way too fast in a shrinking Brazilian economy and that led to financial disaster. In a nutshell: the Synergy group has one profitable asset (AVH) and one deeply unprofitable one (Oceanair dba Avianca Brasil). Synergy (Efromovich) ran out of cash and debt capacity because they were syphoning money to Oceanair/Avianca Brasil. Now they have to liquidate such asset. Poor Avianca Argentina was dead from the beginning as the capital requirements to make it grow could never have been met by Synergy. Now, Synergy are focusing in making the profitable asset (AVH) sustainable in the long run, with the help of United Airlines.
 
Etheereal
Posts: 323
Joined: Tue Nov 29, 2016 11:44 am

Re: Avianca majority shareholder breaches United loan conditions

Fri May 03, 2019 7:43 pm

RCS763AV wrote:
Etheereal wrote:
RCS763AV wrote:
I love these one word statements with no context and without reading the actual thread. No, they are not.

If you can read spanish, check this article: https://www.eltiempo.com/economia/empre ... nca-354470


I can, I'm Colombian. I've read the article a couple of times. Nothing in it is saying they are at the brink of collapse, rather that measures are being taken to avoid a possible crisis in the future. Avianca is a profitable company, just just too indebted. Measures to reduce that debt and lower costs are being taken to ensure its sustainability. That is it.

Avianca Brasil and Avianca Argentina were never profitable ventures. Avianca Brasil grew way too fast in a shrinking Brazilian economy and that led to financial disaster. In a nutshell: the Synergy group has one profitable asset (AVH) and one deeply unprofitable one (Oceanair dba Avianca Brasil). Synergy (Efromovich) ran out of cash and debt capacity because they were syphoning money to Oceanair/Avianca Brasil. Now they have to liquidate such asset. Poor Avianca Argentina was dead from the beginning as the capital requirements to make it grow could never have been met by Synergy. Now, Synergy are focusing in making the profitable asset (AVH) sustainable in the long run, with the help of United Airlines.


In 2019 Efromovich is still blaming the pilots, and the money he lost by the strike could have easily been used to improve work conditions among the workforce and have happy employees. But instead the greed went too far.

I like AV, but Efro really has no idea what to do with the company, he says there's not a crisis, but at the end he says the company is "sick" and needs vaccine or they're gonna get it.
JetBuddy wrote:
"737 slides off the runway" is the new "Florida man"..

:lol:
 
jfk777
Posts: 6973
Joined: Tue Aug 22, 2006 7:23 am

Re: Avianca majority shareholder breaches United loan conditions

Sat May 04, 2019 12:16 am

Etheereal wrote:
RCS763AV wrote:
Etheereal wrote:
If you can read spanish, check this article: https://www.eltiempo.com/economia/empre ... nca-354470


I can, I'm Colombian. I've read the article a couple of times. Nothing in it is saying they are at the brink of collapse, rather that measures are being taken to avoid a possible crisis in the future. Avianca is a profitable company, just just too indebted. Measures to reduce that debt and lower costs are being taken to ensure its sustainability. That is it.

Avianca Brasil and Avianca Argentina were never profitable ventures. Avianca Brasil grew way too fast in a shrinking Brazilian economy and that led to financial disaster. In a nutshell: the Synergy group has one profitable asset (AVH) and one deeply unprofitable one (Oceanair dba Avianca Brasil). Synergy (Efromovich) ran out of cash and debt capacity because they were syphoning money to Oceanair/Avianca Brasil. Now they have to liquidate such asset. Poor Avianca Argentina was dead from the beginning as the capital requirements to make it grow could never have been met by Synergy. Now, Synergy are focusing in making the profitable asset (AVH) sustainable in the long run, with the help of United Airlines.


In 2019 Efromovich is still blaming the pilots, and the money he lost by the strike could have easily been used to improve work conditions among the workforce and have happy employees. But instead the greed went too far.

I like AV, but Efro really has no idea what to do with the company, he says there's not a crisis, but at the end he says the company is "sick" and needs vaccine or they're gonna get it.


With all the mergers in Latin American Aviation maybe the time has come to merge Copa and Avianca ? With Latam there is not much left to merge with, AR and AM are too far from Colombia. Imagine AV 787 flying from Panama to Tokyo and all he European cities AV already flies to from BOG. The time has come for "Covianca" or Copanca or Copa is nice an short.
 
Etheereal
Posts: 323
Joined: Tue Nov 29, 2016 11:44 am

Re: Avianca majority shareholder breaches United loan conditions

Sat May 04, 2019 1:09 pm

I dont really see a Business case for AV and CM to merge, considering AV wants to have everything routed thru the slow and congested BOG, while PTY is a fast hug airport (and allows instant connection lane swap, unlike BOG)
JetBuddy wrote:
"737 slides off the runway" is the new "Florida man"..

:lol:
 
RCS763AV
Posts: 3783
Joined: Mon Jun 14, 2004 1:22 am

Re: Avianca majority shareholder breaches United loan conditions

Sun May 05, 2019 5:34 pm

jfk777 wrote:
Etheereal wrote:
RCS763AV wrote:

I can, I'm Colombian. I've read the article a couple of times. Nothing in it is saying they are at the brink of collapse, rather that measures are being taken to avoid a possible crisis in the future. Avianca is a profitable company, just just too indebted. Measures to reduce that debt and lower costs are being taken to ensure its sustainability. That is it.

Avianca Brasil and Avianca Argentina were never profitable ventures. Avianca Brasil grew way too fast in a shrinking Brazilian economy and that led to financial disaster. In a nutshell: the Synergy group has one profitable asset (AVH) and one deeply unprofitable one (Oceanair dba Avianca Brasil). Synergy (Efromovich) ran out of cash and debt capacity because they were syphoning money to Oceanair/Avianca Brasil. Now they have to liquidate such asset. Poor Avianca Argentina was dead from the beginning as the capital requirements to make it grow could never have been met by Synergy. Now, Synergy are focusing in making the profitable asset (AVH) sustainable in the long run, with the help of United Airlines.


In 2019 Efromovich is still blaming the pilots, and the money he lost by the strike could have easily been used to improve work conditions among the workforce and have happy employees. But instead the greed went too far.

I like AV, but Efro really has no idea what to do with the company, he says there's not a crisis, but at the end he says the company is "sick" and needs vaccine or they're gonna get it.


With all the mergers in Latin American Aviation maybe the time has come to merge Copa and Avianca ? With Latam there is not much left to merge with, AR and AM are too far from Colombia. Imagine AV 787 flying from Panama to Tokyo and all he European cities AV already flies to from BOG. The time has come for "Covianca" or Copanca or Copa is nice an short.


Copa and Avianca? Why would Copa want to merge with anybody? They are one of the top airline businesses in the world regarding profit margins, thanks to running a hell of an efficient operation in PTY and having a simple business model: one narrowbody plane, one efficient connection airport in the middle of the continent, all long-haul is codeshared. Plus they're entering the JV with AV and UA which gives them all the benefits of doing business together without the complexities of merging into one company.

Look at AVH and Azul-TAP in a few years down the road. That's whats going to be interesting.

Etheereal wrote:
RCS763AV wrote:
Etheereal wrote:
If you can read spanish, check this article: https://www.eltiempo.com/economia/empre ... nca-354470


I can, I'm Colombian. I've read the article a couple of times. Nothing in it is saying they are at the brink of collapse, rather that measures are being taken to avoid a possible crisis in the future. Avianca is a profitable company, just just too indebted. Measures to reduce that debt and lower costs are being taken to ensure its sustainability. That is it.

Avianca Brasil and Avianca Argentina were never profitable ventures. Avianca Brasil grew way too fast in a shrinking Brazilian economy and that led to financial disaster. In a nutshell: the Synergy group has one profitable asset (AVH) and one deeply unprofitable one (Oceanair dba Avianca Brasil). Synergy (Efromovich) ran out of cash and debt capacity because they were syphoning money to Oceanair/Avianca Brasil. Now they have to liquidate such asset. Poor Avianca Argentina was dead from the beginning as the capital requirements to make it grow could never have been met by Synergy. Now, Synergy are focusing in making the profitable asset (AVH) sustainable in the long run, with the help of United Airlines.


In 2019 Efromovich is still blaming the pilots, and the money he lost by the strike could have easily been used to improve work conditions among the workforce and have happy employees. But instead the greed went too far.

I like AV, but Efro really has no idea what to do with the company, he says there's not a crisis, but at the end he says the company is "sick" and needs vaccine or they're gonna get it.


I'm talking about Avianca's actual numbers which have to follow New York Stock Exchange and Colombian Stock Exchange accounting and disclosure standards when published. The company is profitable, not bleeding millions like Oceanair was/is. Hence why there is no such crisis and the company is not liquidating as Oceanair is.

The fact that Efromovich is a basketcase is another thing. If he runs out of money Synergy can just sell the asset. No need to liquidate anything.

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