Avianca parent plans IPO to seal comeback bondholders bet big on

The holding company for Avianca Group International Ltd., a Colombian airline that filed for bankruptcy during the pandemic, is planning an initial public offering as revenue roars back.

“Without a doubt the IPO makes sense to support the group’s growth,” Avianca’s head of investor relations Maria Cristina Ricardo said in an interview. The plan is for Abra Group Ltd. to sell shares in New York or London in the next 12 to 18 months, she added.

Air travel in Latin America has rebounded to pre-pandemic levels, according to data from OAG Aviation. That’s paved the way for a comeback of the industry that saw a string of bankruptcy filings after demand sank in 2020 and regional governments refrained from providing hefty support packages like those offered in the US and Europe.

Avianca, the lead airline for Colombia and Ecuador, sought protection from creditors in the US a few months after the pandemic began. Within weeks, two other major carriers in the region, Latam Airlines and Grupo Aeromexico SAB de CV, did the same.

The process helped Avianca cut its debt load to $3.1 billion at the end of 2022 from $5.3 billion two years earlier, allowing it to better compete with low-cost carriers. The company filled up about 80% of its planes in the fourth quarter, with total operating revenue reaching $1.2 billion — the best such result since the restructuring, the carrier said. 

Wall Street has been betting on the firm’s comeback for months. Avianca’s notes due in 2028 have handed investors returns of more than 15% this year, more than almost any company in Latin America, according to a Bloomberg index. They’ve also trounced the return of around 5% on an index of risky airline bonds. 

“Avianca itself is doing pretty well lately,” said Sergey Goncharov, an investor at Vontobel Asset Management in Miami, “driven by overall massive resumption of travel globally, its much leaner capital structure and continuous management effort to streamline operations.” 

Among the changes implemented since the company emerged from its restructuring in late 2021 was uniting under common 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 main shareholders — was announced as chairman, while Gol founder Constantino de Oliveira Junior was made CEO. 

Elliott International LP is also a major shareholder of Avianca. Abra’s current ownership structure has not been disclosed, a spokesperson said. 

The company expects leverage, as measured by debt levels relative to a key earnings metric, to shrink to 3.3 by the end of the year, Ricardo said. Debt was 4.3 times earnings before interest, taxes, depreciation, amortization and rent costs in the fourth quarter, compared with 6 for global airlines, according to a Bloomberg Intelligence analysis. 

Avianca is not alone in its plan to sell shares. Latam Airlines is also seeking to re-list American depositary receipts on the New York Stock Exchange this year, Chief Financial Officer Ramiro Alfonsín said last month.