Colombia Court Blocks Government Loan to Bankrupt Avianca

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A Colombian court temporarily blocked a $370 million government loan to Avianca Holdings SA after a citizen expressed concern about a lack of guarantees.

The Cundinamarca Administrative Tribunal granted an injunction to suspend disbursement after a motion filed by a citizen against the Finance Ministry, the presidency and the airline said the loan may become a “threat” to collective rights and public worth, according to a copy of the ruling sent by court.

The action filed by Jonatan Ruiz demanded the bankrupt airline provide “real, material and above all valuable” guarantees to back the loan, which has been blasted by local competitors and lawmakers who called it out-of-line compared with spending on social services and amounts offered to other airlines.

The Finance Ministry and the other defendants have 10 days to respond to the motion. An Avianca spokeswoman said the company’s legal team was evaluating the ruling and she had no immediate comment. The Finance Ministry said it hasn’t been notified about the ruling.

Avianca joins Latam Airlines Group SA and Grupo Aeromexico SAB in filing for bankruptcy protection amid a decline in travel due to the coronavirus pandemic.

Avianca on Sept. 8 placed $1.3 billion of loans, paying a hefty spread of more than 10 percentage points over the London interbank offered rate and a discounted price of 98 cents on the dollar. The loans, part of a $2 billion bankruptcy plan, will need court approval.

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