February 6, 2019 / 2:55 PM / 14 days ago

Elliott funds to take part in Avianca's $75 million capitalization: document

FILE PHOTO - Employees are seen at the desk of Avianca airlines at Afonso Pena International Airport in Sao Jose dos Pinhais, Brazil December 13, 2018. REUTERS/Paulo Whitaker

SAO PAULO (Reuters) - Funds controlled by activist investor Elliott Management have agreed to extend $75 million in financing to bankrupt airline Avianca Brasil, according to documents seen by Reuters on Wednesday.

A term sheet signed by Manchester Securities Corp, Elliott Associates and Elliott International was submitted to the court overseeing Avianca Brasil’s bankruptcy proceedings on Monday, the document shows.

Avianca Brasil on Friday filed a reorganization plan with the court in which the carrier said it was hoping to secure $75 million in financing to continue operations and emerge from bankruptcy.

The new capital would be invested through convertible debt instruments to be issued by a new company called Life Air to be created as part of the restructuring, Avianca said in the plan.

The investment will leave the Elliott funds with a 49 percent stake in that new entity, financial newspaper Valor reported.

Avianca Brasil, Brazil’s fourth-largest airline, filed for bankruptcy protection in December saying its operations were threatened by lessors trying to repossess airplanes.

The airline’s creditors and aircraft leasing companies will be able to take part in the capitalization, the company said in the reorganization plan.

Last week, Avianca said a judge decided that it would be allowed to maintain its current fleet of planes under operation until at least April, rebuffing lessors that were seeking to repossess the planes immediately.

Avianca Brasil is separate from Avianca Holdings which is based in Colombia, although they share a corporate parent.

Reporting by Ana Mano; Editing by Susan Thomas

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