Avianca Holdings studies three airline proposals

Avianca Holdings are expected to make a decision on which foreign carrier investment package is best suited to its current and future needs following the submission of three proposals.

Quoting sources familiar with the proposed deal, The” New York Times” reports US-based hedge fund, Elliott Management, which is involved in the deal, received proposals from Panama’s Copa Airlines, United Airlines parent United Continental Holdings Inc, and Delta Air Lines, the latter two from the U.S.

Avianca has financial problems.

Avianca has financial problems.

The Panamanians are proposing a merger that would value Avianca at more than $2 billion. On the US carriers’ part, United has offered a $500 million loan to Avianca and to potentially become one of its investors. Delta has offered more than $1 billion in cash, the bulk of which would go to buying out most of parent firm, Synergy, with the rest going to Avianca. The Delta bid implied a $1.9 billion valuation, the paper said.

Avianca’s board sat to consider each of the offers and to decide whether to accept any of the bids or to reissue a tender.

Avianca Holdings has interests in aviation-related firms in Ecuador, Argentina, Colombia, El Salvador, Costa Rica, Honduras, Nicaragua, Peru, Guatemala, and Brazil. As such, gaining access to Avianca would considerably boost the footprint of any of the three contenders, most notably the two US operators which, at present, lack a substantial footprint in the Latin American market.

For its part, Avianca Holdings is seeking a partner to help shore up its balance sheet and support future growth plans.

Trouble was brewing this summer at Avianca Holdings, Latin America’s second-biggest airline. Tight on cash, the airline needed to raise money. For many on the board, one option was selling part of the company.

The company’s largest investor, Bolivian-born entrepreneur, Germán Efromovich , had other ideas. The airline was the thread holding together the remnants of his once-powerful empire spanning oil and gas businesses, shipyards, hotels and airlines. He was not about to let it go without a fight.

A number of suitors, including Delta Air Lines, United Airlines and Copa Airlines of Panama, indicated interest in buying a stake — including buying out Mr. Efromovich and his brother, José — but the two made it known that they were not ready to relinquish control, people with knowledge of the negotiations said. Mr. Efromovich was often at odds with Avianca’s second-biggest shareholder, Roberto Kriete.

Tensions in the boardroom were so high in recent months that there were shouting matches in some meetings.

But there was a struggle on another front that would soon bring the parties together. Mr. Efromovich, after making big bets on the energy industry before oil prices plummeted, was on the brink of default on hundreds of millions of dollars in loans. The lender was Paul E. Singer and his hedge fund, Elliott Management, best known for its decade-long battle with Argentina over its defaulted debt. And some of the collateral was Mr. Efromovich’s stake in Avianca.

That has brought Elliott’s executives to the negotiating table in recent months, meeting with Avianca’s suitors, participating in board meetings and keeping an eye on their borrower.

If a deal comes together, Elliott would have helped broker one of the biggest deals in the airline industry this year.

Despite its recent troubles, Avianca, which is based in Bogotá, Colombia, and second in the region only to the Chile-based Latam Airlines, is an attractive asset. Latin America is expected to be the largest growth market for travel in and out of the United States over the next two decades, according to a report by the Federal Aviation Administration. American Airlines is the only United States airline with a substantial presence in the region.

Avianca has a workforce of 20,000 people, has flights to 100 destinations in 28 countries in America and Europe.

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