May 9, 2017 / 9:10 PM / 2 years ago

New York judge halts request in Avianca Airlines shareholder spat

(Reuters) - A judge has frozen an information request by Avianca Airlines’ AVT_p.CN No. 2 shareholder, ruling against one piece of its push to stop negotiations between Avianca and United Continental Holdings Inc led by the airline’s top shareholder, Synergy Group.

An Airbus A330 of Avianca airline takes off, at the Simon Bolivar airport in Caracas, Venezuela October 23, 2016. REUTERS/Carlos Garcia Rawlins

New York Supreme Court Judge Anil C. Singh denied the discovery request filed by No. 2 shareholder Kingsland Holdings Ltd in its push to have talks between Avianca and United halted.

Kingsland had previously said it wanted all proceedings stopped until shareholders vote on whether to appoint an auditor to examine transactions between the airline and its controlling shareholder.

Singh ruled that Kingsland had “failed to show the imminent harm it may incur should expedited discovery be denied.”

The decision was the latest development in a legal fight between the top two shareholders at Colombia’s largest airline.

“Avianca is pleased with today’s outcome and looks forward to the court’s consideration of its motion to dismiss Kingsland’s lawsuit,” the airline said in a statement. “Avianca believes the lawsuit is entirely baseless and without merit.”

Avianca’s two largest shareholders are suing one another over an attempt by Avianca to forge an alliance with United. Kingsland has called the deal “egregiously one-sided” and said it represents a bad deal for Avianca’s other shareholders.

Kingsland sued Avianca and Synergy to halt the negotiations, and Avianca countersued Kingsland, seeking to dismiss its lawsuit filed in New York State Supreme Court in late February.

The cases will not move forward with an exchange of evidence until the court rules on Avianca’s motion to dismiss Kingsland’s lawsuit or until an agreement is struck between Avianca and United.

Synergy is controlled by investor German Efromovich, who along with Avianca is being sued by Kingsland for allegedly negotiating an $800 million loan and strategic alliance behind the backs of other shareholders.

Synergy holds 78 percent of Avianca voting shares. Kingsland holds about 22 percent of Avianca’s voting shares and 14 percent of total shares.

A Kingsland representative said the judge’s decision to stay its discovery request did not address the merits of its lawsuit. However, the representative said Kingsland was pleased it had exposed talks between United, Synergy and Efromovich, “which will be the subject of scrutiny by the court and the public if a definitive agreement is announced.”

Reporting by Dion Rabouin; editing by Cynthia Osterman and Clive McKeef

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