A Colombian government study to explore a US $ 370 million bankruptcy loan from Avianca taken out just one day before the loan was approved; Get paid by Avianca


Finance Colombia has learned that a feasibility study to determine the viability of a government bailout of Avianca Airlines, of which Colombian President Ivan Duque’s sister, Maria Paula Duque is a senior executive, had been contracted by the Ministry of Finance the day before Duque’s announcement of the $ 370 million. package as done… But to be paid by Avianca.

The contract, with the American law firm Arnold & Porter Kaye Scholer LLP was executed for, under the clause (original document below): B) ENTREPRENEUR PRODUCTS recommendation document (translated):

  1. “Legal Analysis of the Participation of the Government of Colombia as” Debtor in Possession (DIP) “in the bankruptcy case of Avianca Holdings SA brought before the United States Bankruptcy Court, Southern District of New York in under Chapter 11 of the Bankruptcy Code. The document will contain the following elements:
    1. Report on the restructuring process and the mechanisms for protecting the interests of the nation during the process.
    2. Analysis of proposed funding i. Possibility of recovery of public resources invested in any financing structure.

In other words, the analysis of the proposed financing was not ordered until the day before the announcement of the financing by the President. In addition, the funding must be paid by Avianca and not by the government. Obviously, the political decision to fund the airline was made before any study by the law firm could be done.

Earlier this year, Colombian President Ivan Duque said any aid to the airline industry, affected by the COVID-19 coronavirus pandemic, would be treated fairly. While Panama-based Avianca bills itself as a Colombian airline and Duque’s sister is a senior executive there, the bankrupt Colombian branch of the LATAM airline and the also bankrupt Colombian domestic airline EasyFly, asked for help without a definitive response from the Duque administration.

Colombian low-cost airline Viva Air is in a much better financial position than others and has applied for bridge financing from the government, but like all other airlines except Avianca has also had the Duque’s cold shoulder.

Finance Colombia has reached out to Avianca executives for comment on this article, but received no response by post.

Photo above: Juan Guillermo Moncaleano ANI (courtesy Ministerio de Transporte)

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