(Bloomberg) – The holding company of Avianca Group International Ltd., a Colombian airline that has filed for bankruptcy during the pandemic, is planning an IPO as earnings tumble.
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“The IPO undoubtedly makes sense to support the growth of the group,” said Maria Cristina Ricardo, Head of Investor Relations at Avianca, in an interview. It is planned that the Abra Group Ltd. Selling shares in New York or London in the next 12 to 18 months, she added.
Air travel in Latin America has recovered to pre-pandemic levels, according to data from OAG Aviation. That has paved the way for a comeback for the industry, which has seen a spate of bankruptcy filings after demand slumped in 2020 and regional governments refrained from providing hefty support packages like those in the US and Europe.
Avianca, the flagship airline serving Colombia and Ecuador, sought protection from US creditors a few months after the pandemic began. Within weeks, two other major airlines in the region, Latam Airlines and Grupo Aeromexico SAB de CV, did the same.
The process helped Avianca reduce its debt burden from $5.3 billion two years earlier to $3.1 billion by the end of 2022, allowing it to better compete with low-cost airlines. The company filled about 80% of its planes in the fourth quarter, with total operating income reaching $1.2 billion — the best result since the restructuring, the airline said.
Wall Street has been betting on the company’s comeback for months. Avianca’s 2028 notes have given investors returns of more than 15% this year, according to a Bloomberg index, more than almost any company in Latin America. They’ve also wiped out the roughly 5% yield on an index of risky airline bonds.
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“Avianca itself has been doing pretty well lately,” said Sergey Goncharov, an investor at Vontobel Asset Management in Miami, “driven by the overall massive resumption of global travel, its much leaner capital structure and management’s continued efforts to scale up operations streamline.”
Among the changes implemented since the company emerged from its reorganization in late 2021 was the association under joint ownership with Brazil’s Gol Linhas Aereas Inteligentes SA. When the airlines announced the deal last year, Salvadoran mogul Roberto Jose Kriete Avila – the owner of Kingsland International Group SA, one of Avianca’s major shareholders – was appointed chairman, while Gol founder Constantino de Oliveira Junior was appointed CEO.
Elliott International LP is also a major shareholder of Avianca. Abra’s current ownership structure has not been disclosed, a spokesman said.
The company expects its debt, as measured by its debt to debt ratio to a key earnings metric, to shrink to 3.3 by the end of the year, Ricardo said. Fourth-quarter debt was 4.3 times earnings before interest, taxes, depreciation and amortization, compared with 6 times for global airlines, according to analysis by Bloomberg Intelligence.
Avianca is not alone in its plan to sell shares. Latam Airlines is also aiming to list American depositary receipts again on the New York Stock Exchange this year, Chief Financial Officer Ramiro Alfonsín said last month.
–Assisted by Tom Contiliano.
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