Avianca Posting Biggest Bond Gain Among Emerging-Market Airlines

  • Bonds return 20% this month; second best in emerging markets
  • Yield falls to 16% after reaching record 22% in December

Colombian airline Avianca Holdings SA is rewarding investors with some of the best returns in emerging markets this month as its bonds recover from record lows.

The carrier’s $550 million of notes due in 2020 returned 20 percent in January as the securities rose to 77.6 cents on the dollar Friday as of 1:43 p.m. in New York. Yields dropped to 15.8 percent from a record 22.3 percent in mid-December.

Avianca is posting the second-best returns in emerging markets, and outperforming regional competitors such as Gol Linhas Aereas SA and Latam Airlines Group SA as passenger traffic increases. Its rivals are more dependent on Brazil, where the economy is forecast to contract the most in more than a century, while Colombia is estimated to have expanded 3 percent last year and forecast to grow 2.8 percent in 2016.

“The December traffic numbers gave the market some confidence that the situation isn’t spiraling out of control and that both domestic and international trends are solid,” said Ken Monaghan, the head of global high yield at Amundi Smith Bredeen LLC in Durham, North Carolina. “Avianca is kind of the standout there in terms of performance this month, but it had been beaten up really hard.”

Avianca reported an 8.3 percent increase in passenger traffic in December from a year earlier. By contrast, domestic air travel in Brazil fell 4.5 percent in December.

Across emerging markets, Avianca’s gain this year trails only securities from Samarco SA, whose benchmark bonds have rebounded after slumping to 31 cents after an environmental disaster at its mine in Brazil.

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