The Official Committee of Unsecured Creditors of Avianca Holdings S.A. (The Committee), by and through its undersigned counsel, submitted this October 25th, a statement in support of the confirmation of the Joint Chapter 11 Plan of Avianca Holdings S.A. and Its Affiliated Debtors, filed on September 15, 2021.
The Committee believes that the settlement embodied in the Plan maximizes recoveries to holders of General Unsecured Avianca Claims.
According to The Committee, the Plan represents the culmination of more than a year of negotiations among the Debtors, the Committee, and the Debtors’ pre and postpetition lenders.
As a result of these efforts, holders of General Unsecured Avianca Claims, who would receive no recovery in a hypothetical liquidation scenario, will share in a distribution valued at approximately $36 million.
The Plan is overwhelmingly supported by the class of General Unsecured Avianca Claims, which includes the 2020 Notes and the 2023 Notes, represented by 92% of the holders of General Unsecured Avianca Claims, representing 98% of the total amount of claims held by the class.
However, there were objections to the Plan, which were filed by a small number of individual holders of 2023 Notes Claims.
According to The Committee, these oppositions attempt to apply legal principles that are inapplicable under the circumstances of these Chapter 11 Cases.
Unfair Valuation
The first objection argue that the Plan violates the Bankruptcy Law because the Debtors did not perform a “fair valuation”.
In response, The Committee conducted an extensive, competitive marketing process to determine the value of their estates, contacting over 125 parties to identify the best terms on which they could secure exit financing, which resulted in the Debtors’ equity being valued at $800 million and the transaction that is now embodied in the Plan.
2023 Notes Remain Secured
Also, the 2023 Notes Objections also appear to argue that the 2023 Notes remain secured, which is not true.
On August 28, 2020, the Debtors and a majority of the holders of the 2023 Notes executed a restructuring support agreement, pursuant to which the Consenting Noteholders agreed to direct Wilmington Savings Fund Society, FSB, as trustee and collateral trustee for the 2023 Notes, to, among other things, consent to the Debtors’ grant of liens securing their Debtor-In-Possession financing facility.
Those liens primed the existing liens granted on all of the collateral securing the 2023 Notes, which now partially secures the DIP Facility.
Avianca’s Plan Consolidation is Improper
Avianca Debtors have operated in a manner that justifies substantive consolidation: in particular, many of the most significant General Unsecured Avianca Claims are subject to cross-entity guarantees, and the separate corporate existence of many of the Avianca Debtors was driven principally by local regulatory requirements.
The Avianca Debtors also act under one umbrella brand of “Avianca” and it is common for the Avianca Debtors to routinely transfer assets and incur intercompany liabilities based on the Avianca Debtors’ needs as a whole.
Avianca’s Debtors Plan
According to The Committee, if the Avianca Plan Consolidation is approved, then the Plan will constitute a single chapter 11 plan for all 37 consolidated Avianca Debtors.
The assets and liabilities of those entities, including all general unsecured claims against them, will be treated as if they belong to a single debtor.
