Avianca’s Chairman Backed Citigroup Loans With Airline Shares

Avianca Holdings SA Chairman German Efromovich has pledged 19 percent of his investment company’s common shares in the Colombian airline as collateral for loans from banks including Citigroup Inc. (C), a filing showed.

Synergy Aerospace Corp., the closely held company through which Efromovich and his brother control Bogota-based Avianca, pledged the shares for the bank loans, according to the Sept. 19 filing with U.S. regulators. The amount of the loans and their dates weren’t disclosed.

Avianca has disclosed plans to spend at least $4 billion through 2019 as it buys more than 100 planes to meet rising passenger traffic in Latin America. The company has increased its debt load, including a sale of $300 million of seven-year dollar-denominated bonds in May. Efromovich may be looking for ways to help finance the airline’s growth, said Nicolas Garavito, an analyst at Ultrabursatiles brokerage in Bogota.

“Avianca has a large expansion plan in Latin America but they don’t necessarily have enough funds for all that they’re planning,” Garavito said. Efromovich may be “trying out other ways to get cash.”

Efromovich, 63, said in a Sept. 10 interview that Synergy is getting eight planes, some of which could be leased to Avianca.

A press official for the airline declined to comment. An e-mail and phone call to Efromovich’s office in Bogota weren’t returned. Natalie Marin, a Citigroup spokeswoman, declined to comment.

Leverage Increase

Avianca’s preferred shares have tumbled by 18 percent this year. They fell 0.8 percent today to 3,720 pesos as of 12:18 p.m. today in Bogota. The common shares aren’t publicly traded. The yield on the bonds has dropped 92 basis points, or 0.92 percentage point, to 7.71 percent since they were issued.

The airline’s net debt was 2.8 times earnings before interest, taxes, depreciation and amortization as of June 30, up from 2.6 times a year earlier, according to Bloomberg data. That compares with 0.8 times for Mexico’s Grupo Aeromexico SAB and 0.6 times for Panama’s Copa Holdings SA, the data show.

The filing was made with the U.S. Securities and Exchange Commission in connection with Avianca’s planned sale of as much as $100 million of American Depositary Receipts backed by preferred shares.

Synergy owns 7 million preferred shares as of Aug. 31, according to the filing. Those were worth about 26.4 billion pesos ($14 million) at yesterday’s closing price.

To contact the reporter on this story: Christine Jenkins in New York at cjenkins28@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.