(Reuters) - Colombia's government said on Saturday it will extend up to $370 million in loans to Avianca AVT_p.CN, amid the airline's Chapter 11 bankruptcy protection process in the United States.
“With a view to guaranteeing service, air connectivity for Colombians and general economic activity, the national government will participate in Avianca’s restructuring process,” the finance ministry said in a statement.
The airline, which is Latin America’s No. 2 carrier, filed for bankruptcy protection in May.
“The operation will take place through a credit of up to $370 million in an 18-month transaction that corresponds to the estimated time the company’s restructuring process will last,” the ministry statement added.
The credit will expire in November 2021.
The company provides about 500,000 direct and indirect jobs and about 14.6 trillion pesos ($3.8 billion) per year to the Andean country’s economy, the ministry said, equivalent to about 1.4% of gross domestic product.
Avianca maintaining its operations has “significant” benefits for Colombia, the statement added.
The loan was authorized by the administrative committee of the country’s emergency fund and will be evaluated and definitively authorized by the judge overseeing the bankruptcy in a New York court.
The airline first approached the government for financing in March, the ministry said.
Avianca said it had no comment on the loan. It will partially restart operations in Colombia next week as a national quarantine begun in March lifts.
If it fails to come out of bankruptcy, Bogota-based Avianca would be one of the first major carriers worldwide to go under as a result of the novel coronavirus pandemic, which has crippled world travel.
Reporting by Julia Symmes Cobb and Luis Jaime Acosta; editing by Grant McCool
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