shareholder profile: efromovich brothers double down on ... profile 19 jun 2018.pdfairline company....

Avianca Holdings, OceanAir Linhas Aéreas, Synergy Group 19 June 2018

Shareholder Profile: Efromovich brothers double down on Avianca as shipyards struggle

SHAREHOLDER-RELATED RISK (see Risk Factors for details)

Succession Risk Transfer of wealth and control

Moderate

Germán (b. 1950) and José Efromovich (b.1954) control the family’s business but do not hold executive roles. Their chil-dren are not involved in the business, and neither brother has a clear successor.

Political Risk Political exposure and government relations

Moderate

The outcome of Colombia’s 17 June pres-idential election was favorable for Avian-ca. The sister of president-elect Iván Du-que is a senior VP at Avianca Holdings. Duque’s left-wing opponent, Gustavo Petro, had criticized Efromovich’s treat-ment of striking pilots and threatened to punish Avianca. In Brazil, the family ob-tained public contracts and government financing under Workers’ Party (PT) ad-ministrations, whose relationships with business have been the target of corrup-tion investigations.

Legal & Regulatory Risk Lawsuits and regulation

High

Efromovich companies have a history of legal conflict, including litigation with Petrobras over oil-platform contracts. Efromovich and his companies have been accused of bribery, but not charged. Avi-anca is not currently involved in major litigation, but a 2017 lawsuit by minority shareholder Kingsland, while withdrawn, made damaging allegations against Efromovich. Shipyard EISA, under bank-ruptcy protection since 2015, is also in-volved in litigation.

Transparency Risk Structures of ownership and control

High

Avianca Holdings is listed, but little pub-lic data is available on Panama-based Synergy Group Corp, the family’s main holding company. Some companies are held via Panama-based Fundación HJDK, which likewise provides little disclosure.

Governance Risk Corporate governance

High

A 2017 lawsuit by Avianca minority shareholder Kingsland accused the Efromovich family of corporate-governance violations including related-party transactions and other conflicts of interest. The lawsuit was dropped, but Avianca’s financials reveal many transac-tions with private Efromovich companies.

Expansion Risk Growth and diversification

High

The family has diversified into varied sectors, and pledged Avianca shares as collateral. It borrowed extensively to expand its shipyard business. Synergy has invested heavily in aircraft purchases.

Credit History Risk Shareholder history and reputation

High

EISA filed for judicial recovery in 2015. Nearly all of Synergy’s Avianca shares are pledged as collateral for loans on which, according to Kingsland’s lawsuit, Synergy has defaulted. OceanAir and Synergy have repeatedly restructured their debt to Avianca.

Ratings indicate the probability of business disruption or investment loss. High: over 50% or already occurring; Low: not of concern in the foreseeable future

INTRODUCTION

Germán Efromovich and his younger brother José control Bogota and New York-listed Avianca Holdings, Latin America’s second-largest airline company. The acquisition of Avianca out of bankruptcy in 2004 was the culmination of a series of improbable deals – many involving contracts with Brazilian state-owned oil company Petrobras – led by the Bolivia-born, Brazil-based son of refugees who fled Poland during World War II. Through Synergy Group Corp and other holding companies, the brothers also control shipyards and an oil producer in Brazil, a hotel chain and palm-oil plantation in Colombia, Argentina’s Avian Líneas Aéreas, and companies involved in aircraft leasing and ground transportation. José Efromovich owns Brazil’s fourth-largest airline, OceanAir Linhas Aéreas SA (Avianca Brasil), which is slated for eventual acquisition by Avianca Holdings.

After early ventures that included quail eggs and an adult-education school reportedly attended by future president Luiz Inácio Lula da Silva, Efromovich achieved modest success in Brazil’s oilfield-services industry by the 1990s. In the second half of the decade, Efromovich’s Marítima Petróleo e Engenharia won USD 2bn in oil-rig building contracts, prompting speculation about the little-known bidder’s connections and financial backing. More investments followed: the acquisition of shipyard Estaleiro Mauá in 1999, a Colombian oil JV with Elliott Management in 2000, the formation of Petrosynergy in 2001 to operate onshore oil concessions, the launch of commercial flights by OceanAir in 2002 and the acquisition of shipyard Estaleiro Ilha (EISA) in 2003. Marítima, EISA and Mauá contracts have been subject to corruption allegations and investigations, but the companies and their owners have not been charged with wrongdoing.

Efromovich’s dealmaking skills have not been matched by success in execution. Marítima’s rigs were plagued by delays and defects, a major accident and a high-profile dispute with Petrobras, which won judgments against Marítima in Brazil and UK courts. EISA filed for bankruptcy in 2015 – its secured debt consists of USD 294m owed to an Elliott subsidiary – while the Mauá and Brasa shipyards have ceased production. OceanAir has never reported a profit; losses totalled BRL 237m in 2012-2016, with an additional BRL40m in losses through 9M17. Petrosynergy’s website has not been updated in

CONTENTS PAGE

Timeline 3

Family Members 4

Shareholdings 5

Affiliations 7

Risk Factors 8

Debtwire Coverage 11

Germán and José Efromovich control Colombia-based Avianca Hold-ings. José controls OceanAir Linhas Aéreas (Avianca Brasil).

Other business, mostly held via Synergy Group Corp and Fundación HJDK, includes shipyards, aircraft leasing and maintenance, trans-portation, oil & gas production, hotels, palm oil and pharmaceuticals.

Synergy borrowed heavily to invest in Brazil’s shipyard industry, which has largely collapsed. Its Avianca stake is pledged as collateral for loans to its private companies.

Shipyard EISA filed for bankruptcy in 2015. Its main creditor, Elliott Management, has long backed Efromovich companies.

Ilya Garger, Head of Due Diligence +1 212 686 5277, [email protected]

Luciana Leite, Shareholder Research, Latin America +1 212 390 7809, [email protected]

Ben Miller, Managing Editor, Latin America +1 212 686 5354, [email protected]

mailto:[email protected]





FIGURE 1 : Avianca Holdings dividends (USD m)

24 20 350 13

37 39 67

626

249

128

(140)

44 82

(200)

(150)

(100)

(50)

0

50

100

150

200

250

300

2013 2014 2015 2016 2017

Total DividendsDividends to Synergy Profit

Source: Company filings

FIGURE 2: Avianca transactions with Efromovich companies (USD m)

2823

3135

57

12

26

34

23

30

2013 2014 2015 2016 2017

0

10

20

30

40

50

60

Payments to Efromovich companies

Revenue from Efromovich companies


several years, but the latest data showed production of roughly 600 barrels per day. A 2009 JV with Israeli Aerospace appears to have vanished. Another unrealized venture was Efromovich/Silva Capital Partners, a now-defunct private-equity firm founded in 2012 by Germán Efromovich and former Colombian defense minister Gabriel Silva. Aside from the airlines, Synergy’s normally-operating companies are minor: small-plane distributor Synerjet, pharmaceutical maker R2 and car service Empresariales, which provides ground-transport to Avianca. Transportadora del Meta, a provider of cargo services to Avianca, filed for reorganization in Colombia in 2017.

SYNERGIES OR CONFLICTS OF INTEREST?

Avianca is Efromovich’s most successful business, and he has continued gambling on its growth by aggressively expanding OceanAir, acquiring airlines across Latin America and placing large aircraft orders through Synergy Aerospace. Avianca Holdings has generated profits every year since at least 2010 with the exception of 2015, and paid roughly USD 120m in dividends to Synergy over the past five years (Figure 1). Avianca Holdings reported 2017 revenue of USD 4.4bn and adjusted EBITDAR of USD 886m. However, leverage has remained high. Net adjusted debt to EBITDAR was 5.7x in 1Q18, little changed from recent quarters. A majority of Avianca’s USD 4bn in long-term debt debt consists of aircraft leases, with roughly USD 1bn more in off-balance sheet operating leases. Its USD 550m 8.375% senior unsecured notes due 2020, rated B– by S&P and Fitch, last traded at 101.

The airline has been seeking a strategic partner, but negotiations between Efromovich and United prompted a lawsuit in 2017 by minority shareholder Kingsland Holdings, which claimed that a planned United deal was a bailout for Synergy at Avianca’s expense. Kingsland, controlled by El Salvador’s Roberto Kriete, acquired its stake when its TACA airline merged with Avianca in 2010. According to the lawsuit – withdrawn later in 2017 along with a countersuit by Avianca – nearly all of Synergy’s Avianca shares are pledged to Elliott and others as collateral for allegedly defaulted loans to Efromovich private companies, including shipyards. The lawsuit claimed that of a planned USD 800m investment by United, half would go to pay Synergy debt, and USD 130m to Oceanair. Kingsland also said that Elliott had been active in Avianca’s search for a strategic partner, and attended board meetings. The United deal never materialized, but José Efromovich told Bloomberg last month that a new, cashless JV with the airline was likely.

Kingland’s lawsuit accused Efromovich of non-arm’s length related-party transactions with Avianca, and alleged that he caused Avianca to acquire unneeded planes to settle Synergy’s obligations to Airbus. While Kingsland’s claims were never proven, Avianca’s financials show many transactions with Efromovich companies (Figure 2). Synergy provides no disclosure, but available information is consistent with Kingsland’s portrayal of an overextended, distressed conglomerate. Synergy’s website (synergygroupcorp.com) is down, emails were not returned, and a Synergy official hung up when asked for comment.

Germán Efromovich also owns companies outside of Synergy. His Panama-registered Fundación HJDK controls Colombia-based Movich Hotels via Global Operadora Hotelera SAS (COP 84.7bn revenue and COP 649m profit in 2017). HJDK also controls palm-oil company Hacienda La Gloria (COP 36.1bn revenue and COP 10.8bn loss in 2017).

In a best-case scenario for the Efromovich brothers, Avianca could provide Synergy with the resources to recover from its shipyard misadventures. However, they depend heavily on their hedge-fund creditors’ support, the withdrawal of which could cost them control of Avianca – a development that many would welcome.

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FIGURE 3: Avianca Holdings shareholders

Synergy Aerospace

Corp 51.7%(78.1% voting rights)Kingsland

Holdings Ltd14.6% (21.9% voting rights)

Free Float 33.7%


https://www.debtwire.com/intelligence/view/docrepo-Syg8ruIlJm

https://www.debtwire.com/intelligence/view/docrepo-rJZq6aGMAf

https://www.debtwire.com/intelligence/view/docrepo-r1l9BKlHhM

https://www.debtwire.com/intelligence/view/docrepo-rkxIjBhQjM

https://www.debtwire.com/intelligence/view/docrepo-SJxTdrNt9G



TIMELINE

1940s-60s The Efromovich family immigrates from Poland to La Paz, Bolivia, where brothers Germán and José are born. After moving to Chile in 1956, the Efromovich family settles in São Paulo in 1964, where Germán and José’s father runs a textile company.

1970s Germán establishes an adult-education school in São Bernardo do Campo, outside São Paulo. One of his students is reportedly future president Luiz Inácio Lula da Silva. Germán sells the business in 1975. Another early venture is a quail-egg export company.

1975 Germán establishes industrial-equipment distributor Korko (now medical-products distributor REM Indústria e Comércio Ltda).

1977 Germán establishes Brasitest Ltda, which performs inspections on oil and gas equipment.

1995 Germán and José’s Marítima Petróleo e Engenharia Ltda, an oilfield-services company, wins contracts to build six floating platforms for Petrobras. They are the first in a USD 2bn series of contracts won by Marítima through the late 1990s.

1997 Despite delays in completing the original contracts, Marítima wins concessions to build five additional floating platforms for Petrobras. The brothers enter the aviation industry with the founding of helicopter charter company Senior Taxi Aéreo Executivo Ltda.

1998 The brothers establish OceanAir Linhas Aéreas SA as an airplane-charter company.

1999 Marítima acquires shipyard Estaleiro Mauá SA from Omar Resende Peres Filho for USD 1, assuming USD 700m in debt.

2000 In their first Colombian deal, the Efromovich brothers partner with Elliott Management to acquire rights to a portion of the Rubiales oil field via Meta Petroleum Ltd. They also establish oil-transport subsidiary Transportadora del Meta SAS (Transmeta).

2001 The Efromovich brothers establish Petrosynergy Ltda, which bids for Petrobras’ mature oil field concessions and obtains nine contracts in Alagoas state. In a JV with Singapore’s Jurong Shipyard SCM (part of SembCorp Marine Ltd), Estaleiro Mauá establishes Mauá Jurong SA.

2002 OceanAir begins operating commercial flights in Brazil. The Efromovich brothers establish airplane-maintenance company Turbserv Engenharia de Manutenção Ltda.

2003 Marítima acquires a controlling stake in shipyard Estaleiro Ilha SA (EISA) from Jurong Shipyard for BRL 20m and the assumption of BRL 30m in debt. The Efromovich brothers establish holding company Synergy Group Corp and airplane-charter company OceanAir Taxi Aéreo Ltda. Synergy Group acquires airline VIP Ecuador SA.

2004 Synergy Group acquires control of Colombia’s Aerovías del Continente Americano SA (Avianca) out of bankruptcy for USD 63m and assumes USD 220m in debt. The 75% acquired by Synergy was previously held by Grupo Santo Domingo and the National Federation of Coffee Growers of Colombia. OceanAir unsuccessfully attempts to acquire the cargo business of Transbrasil SA Linhas Aéreas. With Peru’s Fondo de Inversiones Sustentables, owned by Pedro Koechlin, OceanAir establishes airline Wayra Peru.

2005 Synergy Group acquires the remaining 25% stake of Avianca from the National Federation of Coffee Growers of Colombia.

2006 EISA receives 10 tanker orders from PDV Marina SA , a subsidiary of Venezuela’s PDVSA.

2007 Toronto-listed AGX Resources Corp (renamed Petro Rubiales Energy Corp) acquires a 75% stake in Rubiales Holdings Ltd, the holding company for Meta Petroleum (50% from Elliott and 25% from Synergy). Later in the year, Synergy sells its remaining 25% stake for USD 10m

and a 13.7% stake in Petro Rubiales, which later merges with Pacific Stratus Energy Ltd to form Pacific Rubiales Energy Corp. Brazilian federal prosecutors accuse Mauá Jurong of fraud in its bid for the P-16 Petrobras oil platform. Synergy Business Management Corp establishes pharmaceutical company R2 Soluções em Radiofarmácia Ltda. Synergy Group acquires Elliott Management’s stake in Transmeta.

2008 Avianca acquires Colombian cargo airline Tampa Cargo SA from Martinair Holland NV. EISA establishes EISA Petro Um SA after receiving four ship orders from Petrobras Transporte SA (Transpetro). BNDES provides a total of BRL 283m in loans for the project.

2009 Synergy Resources Corp acquires oil-and-gas producer Petrocolombia SAS. Germán Efromovich enters the hospitality industry, acquiring Hotel Cartagena de Indias. In a JV with state-owned Israel Aerospace Industries Ltd (IAI), Synergy Group forms defense and aerospace products manufacturer EAE Soluções Aeroespaciais Ltda.

2010 Avianca merges with El Salvador’s Grupo TACA Holdings Ltd, owned by the Kriete family. Synergy Group holds a 67% stake in AviancaTaca Holding SA, while the Kriete family’s Kingsland Holdings Ltd owns 33%. AviancaTaca Holdings acquires Ecuador’s Aerolíneas Galapagos SA (now Avianca Ecuador SA). OceanAir Linhas Aéreas begins to operate as Avianca Brazil, but continues to be owned separately from Avianca. Germán acquires Grupo Agroindustrial Hacienda La Gloria, which owns palm oil plantations in Colombia.

2011 AviancaTaca Holdings lists in Bogotá, raising COP 500bn. Germán Efromovich brands his hotels as Movich Hotels & Resorts.

2012 With former Colombian defense minister Gabriel Silva Luján, Germán forms PE firm Efromovich/Silva Capital Partners. Synergy’s Naval Ventures Corp and SBM Offshore NV found Estaleiro Brasa Ltda, a shipyard JV focused on floating production storage and offloading vessels (FPSOs) for Petrobras.

2013 AviancaTaca Holding is renamed Avianca Holdings SA, which issues USD 300m 8.375% senior unsecured notes due 2020 and lists ADRs on the New York Stock Exchange. EISA Petro Um SA obtains eight more orders from Transpetro, with 46% of the total financed by Caixa Econômica Federal.

2014 Avianca Holdings reopens its 2020 notes, issuing an additional USD 250m. It raises USD 153m through a private placement arranged by Burnham Sterling Securities LLC, with the proceeds used to acquire three new aircraft. Eight of EISA’s contracts (from Swire Pacific Navegação Offshore Ltda and Brasil Supply SA) are cancelled.

2015 Transpetro rescinds three contracts with EISA Petro Um. EISA and EISA Petro Um file for judicial recovery in Rio de Janeiro, citing the cancelled orders and lack of payments from PDVSA. Avianca Holdings sells a 30% stake in LifeMiles Ltd, its frequent flyer program subsidiary, to Advent International for USD 344m. Synergy loses the privatization auction of TAP Air Portugal SA to a consortium led by JetBlue founder David Neeleman, who also controls Azul Linhas Aéreas Brasileiras SA.

2016 Synergy Group acquires Argentine airline MacAir Jet SA (renamed Avian Líneas Aéreas SA) for USD 10m from Sideco Americana SA, controlled by the family of Argentine president Mauricio Macri. Germán Efromovich is accused by former Transpetro CEO Sérgio Machado of paying bribes to win shipyard contracts. Synergy Group announces plans to acquire 49% of Mexico’s Transportes Aeromar SA de CV, owned by the Katz family. OceanAir Linhas Aéreas and United Airlines sign a code-share agreement.

2017 In February, Kingsland sues Avianca, Synergy, the Efromovich brothers and United to block a proposed strategic partnership. Avianca countersues Kingsland and Kriete, but both lawsuits are dropped in November. Synergy Group sells Petrocolombia to Hades E&P Holding SA. Transmeta files for reorganization in Colombia.

Sources: Company filings and websites, press reports.



FAMILY MEMBERS

Note: This chart is based on public information and is not intended to be comprehensive. It includes only individuals relevant to the family business.

José Efromovichb. 1954

Germán Efromovichb. 1950

Wife: Hilda Efromovich

Controlling shareholder and director of Avianca since 2004, and chairman since

2013; founder and controlling

shareholder of Synergy Group Corp and Fundación HJDK; based in São Paulo;

citizen of Brazil, Colombia and Poland; daughters Jenifer, Danielle, Karen do

not appear to be involved in the family business except via holding company

Fundación HJDK

Controll ing shareholder of Avianca since 2004 and director since 2005; owner, director and former CEO of

OceanAirLinhas Aéreas SA; founder and controll ing shareholder of Synergy

Group Corp; based in São Paulo; citizen of Brazil and Colombia; son does not

appear to be involved in the family business



SHAREHOLDINGS: AIRLINES

Note: This chart is based on public information. It contains key companies but is not intended to be comprehensive. USD bonds and market capitalization are included where relevant. Family shareholdings are italicized. Companies are domiciled in Brazil unless otherwise noted.

20-F 2017

Current or past related-party transactions with Avianca Holdings

20-F 2017

Mkt Cap: USD 902m 20-F 2017

20-F 2017 20-F 2017 20-F 2017 20-F 2017 & 2013 CNPJ, Sao Paulo court

20-F 2017 20-F 2017 20-F 2017 & 2013 Sao Paulo court

20-F 2017

OceanAir 3Q17

20-F 2017 & 2013

20-F 2017

20-F 2017 & 2013

2017 20-F Panama corp reg

20-F 2017 20-F 2017 & 2013

2017 20-F CNPJ

2017 20-F 20-F 2017

20-F 2017 & 2013

20-F 2017 CNPJ

20-F 2017 & 2013

20-F 2017 & 2013 20-F 2017 & 2013

CNPJ

20-F 2017 20-F 2017 & 2013

20-F 2017 & 2013

20-F 2017

Cargo Services

Frequent Flyer Program Aircraft & Equipment Leasing Avianca Brasil and Other

Aircraft Maintenance

Ground Handling Services

Call Center

Avianca Argentina

Financing

Other Central American Airlines

Other Sales, Logistics, Maintenance

Oil Industry Testing

Latin Airways Corp (Panama)

Avianca Holdings SA 100%

Grupo Taca Holdings Ltd (Bahamas)


Avianca Holdings SA (Panama)[BVC: PFAVH; NYSE: AVH]Chairman: Germán Efromovich

Directors: José Efromovich & 8 others

Synergy Aerospace Corp 51.5% (78.1% voting rights)Kingsland Holdings Ltd 14.5% (21.9% voting rights)

Free Float 33.6%

Trans American Airlines SA (Peru)

Taca SA 100%

Taca International Airlines SA (El Salvador)

Taca SA 96.84%

Avianca Costa Rica SA

Taca SA 92.40%

LifeMiles Ltd (Bermuda)

Avianca Holdings SA 70%Advent International Corp 30%

Taca SA (Panama)

Grupo Taca Holdings Ltd 100%

Aerovias del Continente Americano SA [Avianca]

(Colombia)

Latin Airways Corp 94.96%Avianca Holdings SA 5.02%

Synergy Aerospace Corp (Panama)

Synergy Group Corp 100%

Synergy Group Corp (Panama)Directors: Germán & José Efromovich

Indirectly controlled by Germán and José Efromovich

Tampa Cargo SAS (Colombia)

Aerovias del Continente Americano SA 71.66%

Avianca Holdings SA 28.32% (indirect stake)

Tampa Cargo Logistics Inc (Florida)

Avianca Holdings SA 99.98%

USD 550m 8.375% senior unsecured notes due 2020

OceanAir Linhas Aéreas SA [Avianca Brasil]

AVB Holding SA 100%

AVB Holding SA

SPSYN Participações Ltda 80%

Turbserv Engenharia de Manutenção Ltda

SPSYN Participações LtdaAerovías Beta Corp

SPSYN Participações Ltda

José Efromovich 99.53%Aerovías Beta Corp

Aerovías Beta Corp

Germán and José Efromovich

Servicios Aeroportuarios Integrales SAI SAS

(Colombia)


Getcom InternationalInvestments SL (Spain)


Getcom Colombia SAS 100%Getcom Servicios SAS (Colombia)

100%Getcom International SA de CV

(El Salvador) 100%Getcom SA de CV (El Salvador) 100%

Avianca Leasing LLC (Delaware)


Avianca Inc (Florida)


Ronair NV (Curacao)


Aviation Leasing ServicesInvestments SA (Panama)


Turboprop Leasing Company Ltd (Bahamas)


Aerospace Investments Ltd (Bahamas)


Intercontinental Equipment Corp Ltd (Bahamas)


Southern Equipment Corp Ltd (Bahamas)


Turbo Aviation Three SA (Panama)

Avianca Holdings SA

Digex Aircraft Maintenance Ltda

SPSYN Participações Ltda Aerovías Beta Corp

Aerotaxis La CosteñaSA (Nicaragua) 68.08%

Isleña de Inversiones SA de CV (Honduras) 100%

Servicios Aéreos Nacionales SA (Costa Rica) 100%

Nicaraguense de Aviacion SA (Nicaragua) 99.61%

Aviateca SA (Guatemala)

Avian Líneas Áereas SA(formerly Macair Jet SA)

Synergy Aerospace Corp (indirect controling stake)

Brasitest Ltda

José EfromovichSPSYN Participações Ltda

Jorge Alberto Vianna

Subsidiaries of Avianca Holdings SAVu-Marsat SA (Costa Rica) 100%

Little Plane Ltd (Bahamas)Little Plane Six Ltd (Bahamas)

Technical and Training Services SAde CV (El Salvador) 99%

Avianca Ecuador SA (formerly Aerolíneas

Galapagos SA)

Avianca Holdings SA 99.62%



SHAREHOLDINGS: SHIPYARDS AND OTHER

Note: This chart is based on public information. It contains key companies but is not intended to be comprehensive. USD bonds and market capitalization are included where relevant. Family shareholdings are italicized. Companies are domiciled in Brazil unless otherwise noted.

Avianca 20-F 2017 Panama corp reg Panama corp reg

Current or past related-party

transactions with Avianca Holdings

ICIJ Panama corp reg Panama corp reg Teka website, 20-F 2017 Panama corp reg, RSPO 2015

Col corp reg

Restruct plan 2018, press reports Panama corp reg

CNPJ

20-F 2017, 2013 OM

Restruct Plan

CNPJ

Colombia corp reg, 2013 OM

CNPJ 20-F 2017 Panama corp reg, CNPJ

Panama corp reg

Press reports 20-F 2017 Colombia corp reg, 2013 OM

Portal Naval CNPJ

Esstudia website


RS Corp website

Press reports


Panama corp reg

SBM 2017 2014 FS

Col corp reg

CNPJ

SBM 2017

CNPJ, Panama corp reg

SBM 2017

SBM 2017

CNPJ

Shipyards Oil & Gas Movich Hotels Palm Oil

Back-Office Services

Pharmaceuticals

Helicopter Charters

Aircraft Sales

Coffee

Transportation

Pineapples

Holding Companies

Student Residences

Agricultural Land

Offshore Rig Builder

Medical Sales & Distribution

Holding Companies

(Defense & Chemicals)

Controlled by Germán and José Efromovich

Synergy Shipyard Inc (Panama)

Synergy Group CorpHamilton Trustees Ltd (Guernsey)

Hamilton Nominees Ltd (Guernsey)

Petrogas Services Group Corp (Panama) (Synergy

Resources Corp until Feb. 2018)

Synergy Group Corp

Transportadora del Meta SAS (Colombia)

(filed for reorganization in 2017)

Synergy Group Corp

Estaleiro Brasa Ltda

SNV Offshore Ltd 50%SBM Offshore NV 50%

Estaleiro Nordeste SA

Synergy Shipyard Inc

Petrosynergy Ltda

Synergy Resources CorpPetrosynergy SA

REM Indústriae Comércio Ltda

José Efromovich 80%Marina Foracchi Abud 15%

Yara Gonçalves 5%

Esstudia SAS (Colombia)

Germán EfromovichGabriel Silva

Grupo Agroindustrial Hacienda La Gloria SA

Sucursal Colombia


King Pineapple CI SAS(Colombia)

Former related party of Avianca Holding; RS Corp is listed as

legal representative as of 2018

Colombian Mountain Coffee CI SAS (Colombia)Director: Germán Efromovich

Former related party of Avianca Holding

Savannah Crops SAS(Colombia)

Former related party of Avianca Holding

Estaleiro Ilha SA [EISA](in judicial recovery since 2015)


Petrosynergy SA(Uruguay)

Synergy Resources Corp 100%

EISA Petro Um SA (in judicial recovery since 2015)

Estaleiro Ilha SA 100%

Brasil Superlift Servicos de Içamento Ltda


SNV Offshore Ltd (Bermuda)

Naval Ventures Corp 50% (Synergy Group Corp)

SBM Offshore NV 50%

EISA Montagens Ltda

Estaleiro Ilha SASynergy Shipyard Inc

Estaleiro Mauá SA


Global Operadora Hotelera SAS (Colombia)

Controlled by a foundation created by Germán Efromovich

Teka Capital Inc 47%

Movich Hotels include:Hotel Pereira SA (Colombia)

Cartagena de Indias Small Luxury Hotel SAS (Colombia)

Promotora de Hoteles Medellín SA (Colombia)

Empresariales SAS(Colombia)

Synergy Group Corp

Synerjet Corp (Panama)

Synergy Group Corp

Synerjet Brasil Ltda

Synerjet CorpJosé Efromovich

R2 Soluções em Radiofarmácia Ltda

Synergy Business Management Corp JM Participações e Administração

Ltda (José Antonio and Hieldis Fernandes Martins)

Synergy BusinessManagement Corp

(Panama)

Synergy Group Corp

Fundación HJDK (Panama)

JDK Holdings Corp 100%


(Panama)

Fundación HJDK (controlling stake)

Helicópteros Nacionales de Colombia SA [Helicol]

Controlled by Synergy Group Corp;RS Corp is listed as legal representative as of 2018

Maritima Petróleo e Engenharia Ltda

Germán & José Efromovich (via Una Ventures Corp (Panama))

Lomus Investments Inc (Panama)

Recursos y Soluciones Corporativas SAS (Colombia)

[RS Corp]

Affiliated with Synergy Group Corp

ALQ Participações Ltda (formerly Etrum Participações Ltda, Synergy Defesa e Segurança Ltda and EAE

Soluções Aeroespaciais Ltda)QTS Participações Ltda

AEQ Aliança Eletroquímica Ltda (formerly AEQ Aeroespacial, Quimica

e Defesa)

Controlled by Germán EfromovichHJDK Aerospacial Inc (Panama)

Translog SA (Panama)Capital Logistics Holding Corp

(Panama)

Controlled by HJDK Aerospacial and Translog SA

Segurasa Participações LtdaNewco Participações Ltda

Synergy Group Corp (Panama)Directors: Germán & José Efromovich

JDK Holdings Corp (Panama)Directors: Jenifer Efromovich Klepacz, Danielle Efromovich

Mayo, Karen Efromovich Mroz

Controlled by Germán Efromovich

Tucurinca SA Sucursal Colombia

Tucurinca SA; RS Corp is listed as legal representative as of 2018

Tucurinca SA (Panama)

Germán Efromovich is listed as president and director as of 2018

Mauá Jurong SA

Estaleiro Mauá SA 100%

Pelican Assets Sàrl (Luxembourg)




AFFILIATIONS Relationships with individuals, companies and institutions

Brazil political affiliations

Former Brazilian president Luiz Inácio Lula da Silva (2003-2010) was a student at an adult-education school run by Germán Efromovich in the 1970s, according to press reports. While their relationship is unclear, Synergy received numerous shipyard con-tracts under Lula and his hand-picked successor Dilma Rousseff (2011-2016). Government-owned banks BNDES and Caixa Econômica Federal provided financing for some of these contracts.

José Carlos Bumlai is a Brazilian executive and friend of Lula. In 2015, federal police found documents in Bumlai’s apartment sug-gesting he used his influence to help Efromovich’s Marítima Petróleo e Engenharia win Petrobras contracts, according to Istoé. He was sentenced to nearly 10 years in prison for fraud and corruption in 2016, in connection with the Lava Jato investigation.

Elliott Management Corp

Paul Singer’s Elliott Management Corp is a major lender to Synergy Group, most of whose shares in Avianca are pledged as collat-eral for loans. Elliott has been involved with Efromovich companies since at least 2000, when they formed a Colombian oil JV. El-liott also partnered with Efromovich in power-barge JV Proteus Power. Kingsland Holdings stated in its 2017 lawsuit that 97% of Synergy’s Avianca Holdings shares were collateral for defaulted loans from Elliott and others, that Elliott representatives attended Avianca board meetings, and that the fund was “an advisor to Synergy and the Efromoviches throughout the Strategic Process” of finding a partner or buyer for Avianca. The New York Times reported in December 2016 that the loans backed by Avianca shares were to Synergy’s shipyards. Germán Efromovich told Valor Econômico that the loans secured by Avianca shares were used to finance airplane purchases, and that while his shipyards also received loans from Elliott, these were backed by shipyard assets and personal guarantees. Avianca Holdings disclosed in 2013 that Synergy Shipyard had debt to Citibank NA secured by Avianca shares. According to the March 2016 restructuring plan of Estaleiro Ilha SA (EISA), the shipbuilder’s only secured debt at end-2015 was USD 294m owed to Elliott subsidiary Manchester Securities Corp. In March 2017, La República reported that Synergy Group’s total debt to Elliott was over USD 500m.

Israel Aerospace Industries

In 2009, state-owned Israel Aerospace Industries Ltd (IAI) and Synergy Group formed Brazil-based JV EAE Soluções Aeroespaciais Ltda, a defense and aerospace equipment manufacturer, according to an IAI announcement. EAE does not appear to be active.

Roberto Kriete (Kingsland Holdings)

El Salvador’ Kriete family, led by Roberto Kriete, has held a minority stake in Avianca Holdings through Kingsland Holdings since 2010, when Avianca merged with Kriete’s Grupo TACA Holdings Ltd. Kriete is on the board of Carlos Slim’s Teléfonos de Mexico SAB, as well as Fundación Carlos Slim Helú and other entities related to the Mexican billionaire. The family also owns hotels in Central America which have transactions with Avianca. Kingsland currently has a 14.5% stake in Avianca Holdings. Kingsland’s joint-action agreement (shareholders’ agreement) with Synergy allows it to appoint two board members. Alleged violations of the agreement were the basis of lawsuits between Kingsland and Avianca in 2017 (see Risk Factors).

Mauricio Macri The family of Mauricio Macri, the president of Argentina since 2015, sold MacAir Jet SA (now Avian Líneas Aéreas) to Synergy Group in March 2016 for USD 10m, according to La Nación. The Macri family, Germán Efromovich and the CEO of Avian Líneas Aéreas have been under investigation in Argentina since 2017 over the allocation of airline routes (see Risk Factors).

Petrobras

Petrobras granted Efromovich’s Marítima Petróleo e Engenharia contracts to build floating platforms in the 1990s, despite Ma-rítima’s lack of experience. Marítima and its subsidiaries were subsequently involved in protracted litigation with Petrobras over contract cancellations (see Risk Factors). According to reports by Época and other publications, Germán Efromovich was close to former Petrobras executives Joel Rennó (CEO from 1992 to 1999) and Antônio Carlos Agostini (director from 1995 to 1999). Syn-ergy’s shipyards also won many contracts with Petrobras for ships and oil platforms. There have been allegations of corruption in relation to both Marítima’s and the shipyards’ contracts with Petrobras (see Risk Factors).

SBM Offshore Netherlands-based SBM Offshore NV formed JV Estaleiro Brasa with Synergy Group Corp in 2012. The FPSO-focused shipyard is now largely dormant following contract cancellations by Petrobras. SBM signed a leniency agreement with Brazilian authorities in July 2016, admitting to bribing Petrobras employees to obtain oil-platform contracts, and agreed to pay BRL 1.2bn in fines.

Gabriel Silva Gabriel Silva is Colombia’s former defense minister (2009-2010) and ambassador to the US (2010-2012). He is also the former CEO of the National Federation of Coffee Growers of Colombia (2002-2009), whose 50% stake in Avianca Synergy acquired in 2004-2005. In 2012, Silva and Germán Efromovich founded Efromovich/Silva Capital Partners, which is no longer in operation.

Teka Capital

Private-equity firm Teka Capital was founded in 2009 by Diego Córdoba. He previously led Valorem SA, the holding company of Colombia’s Santo Domingo family, from which Synergy acquired a 50% stake in Avianca. According to its website, Teka has a “partnership with the Santo Domingo and Rothschild families”. In April 2013, Teka acquired a 47% stake in Efromovich’s Global Operadora Hotelera SAS (Movich Hotels). In June 2018, Germán Efromovich told El Tiempo that the chain expects to receive USD 150m in new capital and plans to expand to Miami in 2019.

United Continental Holdings

In June 2016, OceanAir Linhas Aéreas and United announced a code-share agreement. In February 2017, Germán Efromovich said he had negotiated a strategic partnership with United. However, the planned deal was scrapped after minority shareholder Kings-land Holdings sued Avianca, United and the Efromovich brothers (see Risk Factors) to block the transaction. In May 2018, Bloom-berg cited José Efromovich as saying that Avianca and United were close to reaching a new agreement that did not include a cash contribution from United.

Isaac Yanovich Farbaiarz

Isaac Yanovich has been an independent director of Avianca Holdings since 2010. He was CEO of Empresa Colombiana de Petróle-os SA (Ecopetrol) from 2002 to 2006. During this time, the Efromovich brothers’ Meta Petroleum operated three oil-field proper-ties with Ecopetrol. According to Kingsland Holdings’ 2017 complaint, Yanovich was a member of the investment committee of Efromovich/Silva Capital Partners and his daughter Denisse Yanovich worked at Efromovich/Silva from 2012 to 2015.



RISK FACTORS Legal issues, conflicts and controversies

Estaleiro Ilha bankruptcy (2015-present)

In June 2015, Efromovich-owned Brazilian shipyard Estaleiro Ilha SA (EISA) and its subsidiary Eisa Petro Um SA filed for bank-ruptcy and laid off 3,000 workers. The shipyard cited cancelled contracts by Transpetro, Swire Pacific Navegação Offshore and Brasil Supply, as well as PDVSA’s failure to make payments. In April 2017, KPMG was appointed as the judicial administrator and the case is ongoing in a Rio de Janeiro court. According to the restructuring plan dated 24 March 2016 and amended in May 2017, the company’s secured debt at end-2015 consisted of USD 294m owed to Elliott Management subsidiary Manchester Se-curities Corp.

Chubb Seguros Brasil and Fator Seguradora, two of EISA’s insurers, sued EISA, Germán and José Efromovich, Synergy Shipyard Inc, Synergy Enterprises Corp, Synergy Group Corp, and Avianca Brasil holding companies AVB Holding SA and SPSYN Partici-pações Ltda in October 2017. According to court documents, the two insurance companies paid BRL 203m in claims to Swire Pacific Navegação. In October, a São Paulo court granted the insurance companies’ request for an injunction barring the sale of SPSYN’s shares of AVB Holdings (a 99.53% stake) and AVB’s shares of its wholly-owned OceanAir Linhas Aéreas. José Efromo-vich appealed the injunction, according to OceanAir’s 3Q17 financial statement.

Lava Jato and bribery allegations (2015-2016)

In their 2016 plea bargains related to the Lava Jato investigation, former Transpetro CEO Sérgio Machado and his son Expedito Machado Neto said they accepted a BRL 28m bribe from Germán Efromovich between 2009 and 2013 in exchange for awarding contracts to EISA, according to Valor Econômico. Expedito told prosecutors that the bribe was disguised as the cancellation fee for an unfulfilled investment agreement between the Machado family and a company linked to Efromovich. Expedito said that another bribe was structured as interest payments on a loan he made to Efromovich. After the claims were reported, Efromovich held a press conference at which he acknowledged making business-related payments to the Machados, but said that he had turned down their requests for bribes.

Efromovich was also implicated in the federal police’s Operação Passe Livre, part of Lava Jato. In November 2015, a raid of the home of José Carlos Bumlai, a friend of ex-president Luiz Inácio Lula da Silva, yielded evidence that “Bumlai used his political con-tacts to influence Petrobras to hire Marítima Petróleo e Engenharia", according to a police document cited by Istoé.

Lease-default lawsuit against Synergy and OceanAir (2016-2017)

In October 2016, Wells Fargo Northwest NA (the trustee for Avolon Aerospace Leasing Ltd) filed a lawsuit against Synergy Aero-space Corp and OceanAir Linhas Aéreas in the US District Court for the Southern District of New York. The lawsuit sought USD 5m in unpaid rent, interest and damages in relation to a 2014 lease for an Airbus A320. In August 2017, the court denied the de-fendants’ motion to dismiss the case based on lack of jurisdiction. The case was voluntarily dismissed on the same day that the court denied the motion to dismiss.

Conflict with Avianca minority shareholder Kingsland Holdings (2017)

Kingsland Holdings filed a lawsuit against Avianca Holdings, Synergy Aerospace, Germán and José Efromovich and United Air-lines in the Supreme Court of the State of New York in February 2017 to block a proposed strategic partnership between Avian-ca and United. Kingsland alleged that Efromovich secretly negotiated Avianca’s proposed partnership with United for his own benefit – essentially as a bailout of Synergy – at the expense of Avianca and minority shareholders. According to the complaint, the deal included a USD 800m loan from United to Synergy, backed by Avianca and OceanAir shares. Half of this would be used to repay existing Synergy debt (including defaulted loans from Elliott) and USD 130m would go to OceanAir, while Avianca itself would only receive about USD 200m. Kingsland also claimed Avianca’s liquidity problems had been caused by Efromovich’s “misconduct”, accused Efromovich of channeling Avianca funds to his private companies through non-arm’s length related-party transactions, and alleged that Synergy used “Avianca’s assets to shore up Efromovich’s other financially-strapped business con-cerns”. Kingsland claimed that Avianca board meetings resembled a “corporate politburo rubberstamping Efromovich’s initia-tives without advance notice, deliberation, independent judgement or hesitation”. Kingsland also claimed that Synergy’s pledge of Avianca shares to back its loans violated the Kingsland-Avianca shareholders’ agreement, as Synergy did not request Kings-land’s approval, and third-party creditors were not permitted transferees of Avianca shares. Avianca denied wrongdoing, but its defense and countersuit focused on Kingsland’s alleged violations of the shareholder agreement, disclosure of non-public infor-mation through its lawsuit and the media, and technical problems with Kingsland’s lawsuit.

On 27 March, Avianca Holdings filed a retaliatory lawsuit against Kingsland and Roberto Kriete to stop Kingsland's "improper actions" aimed at blocking the pending alliance with United and “any further dissemination of the company’s confidential infor-mation”. Avianca also filed a motion to dismiss Kingsland’s lawsuit. Its defense of the United deal noted that while Delta and Copa were also interested in Avianca, their proposals required a change in control, which Synergy would not accept. The lawsuit ac-cused Kingsland of trying to “take over the company” with other partners, and argued that Kriete’s Mexican airline Concesionaria Vuela Compañía de Aviación SAB de CV (Volaris) competes with Avianca in Central America. In November 2017, Synergy and Kingsland agreed to drop their lawsuits. In May 2018, José Efromovich told Bloomberg that Avianca and United were close to reaching a joint-venture agreement that did not include a cash component.




Hacienda La Gloria land dispute (2010-present)

Grupo Agroindustrial Hacienda La Gloria SA, a palm-oil company on property acquired by Germán Efromovich from the family of Colombian politician Carlos Arturo Marulanda Ramirez in 2010, is in an area that has been the subject of land-rights disputes. The Marulanda family was accused of collaborating in the 1990s with paramilitary groups that forcibly evicted peasants, burned homes and assassinated leaders on the property, then called Hacienda Bellacruz. La Gloria responded to criticism by stating that it had acquired the land in good faith and has no connection to the previous owners or crimes committed on the property. Conflict has continued in recent years, with peasants attempting to reclaim land reportedly having been evicted by police and private secu-rity forces. In January 2018, a Colombian court ordered the company to return 1,500 hectares of land to 64 local families, accord-ing to Las 2 Orillas. La Gloria had losses of COP 10.8bn and COP 21.3bn in 2017 and 2016, according to public-registry data.

Concessions to MacAir Jet (Avian Líneas Aéreas) (2017)

Synergy Group acquired MacAirJet SA in March 2016 from the family of Mauricio Macri, Argentina’s president since 2015, for USD 10m, according to La Nación. In 2017, after the airline (now called Avian Líneas Aéreas SA) received authorization from Ar-gentine aviation authority Anac to fly 16 routes, two congressmen filed a criminal complaint against Macri, his father Franco, chief of staff Fernando De Andreis, Germán Efromovich and Avian Líneas Aéreas CEO Carlos Colunga , according to Clarín. The com-plaint claims that Macri influenced Anac to favor Avian. Federal prosecutors charged Macri, his father and De Andreis in March 2017. The investigation is ongoing and also involves concessions to other airlines, according to Reportur.

Avianca pilot strike (2017)

More than half of Avianca’s over 1,200 pilots, represented by the ACDAC union, began a strike on 20 September 2017, according to press reports. The pilots demanded improved safety, wage increases and a reduction in working hours. Due to the strike, Avian-ca suspended ticket sales for over two weeks, and asked a Bogota court to declare the strike illegal based on a law establishing civil aviation an essential public service. The court ruled in Avianca’s favor on 6 October, according to El Pais. Avianca opened internal disciplinary proceedings against striking pilots who failed to return to work. Pilots agreed to resume work on 10 November, but the proceedings continued, and in February 2018 the Supreme Court upheld a lower-court decision authorizing Avianca to fire 702 unionized pilots, El Colombiano reported. The first phase of Avianca’s disciplinary proceedings involved 232 pilots, of whom 107 were fired and 109 suspended. The appeals phase of the proceedings began in April, according to El Colombiano.

Mauá Jurong bribery allegations(2007)

In 2007, Brazilian federal prosecutors accused shipyard Mauá Jurong of fraud in the bid for the P-16 Petrobras oil platform, as part of the Águas Profundas investigation into Petrobras platform contracts. According to O Globo, Mauá Jurong and other com-panies paid bribes to Petrobras employees and politicians to win bids and obtain environmental certification. According to Conex-ão Marítima, a director of Mauá Jurong was charged in the investigation.

Legal conflicts with Petrobras

Marítima Petróleo e Engenharia was involved in lawsuits with Petrobras in Brazilian and UK courts between 2001 and 2007 in connection with oil platform contracts. Marítima obtained numerous contracts with Petrobras to build oil platforms in the second half of the 1990s, but Petrobras cancelled six contracts in 1999 following delays in delivery. In 2001, an accident at one of these platforms killed 11 people and spilled 1,500 tons of oil, according to press reports.

According to Valor Econômico, Marítima subsidiaries Petromec Inc and Petrodeep Inc filed lawsuits in Brazil and the UK against Petrobras subsidiary Braspetro Oil Services (Brasoil) in 2002, seeking a total of USD 245m in damages related to cancelled con-tracts and the accident. In 2004, a Brazilian court ruled in Marítima’s favor, but in 2007 the Supreme Court of Justice reversed the decision and ordered Marítima to pay Petrobras 10% of the BRL 2.5bn total contract value. In 2004, a UK court ordered Petromec and Petrodeep to pay Brasoil USD 131m in connection with platform-delivery delays.

In 2002, Petrobras filed a lawsuit against Marítima in a UK court to recover USD 255m that Petrobras had paid to repair two alleg-edly defective platforms. In 2007, the court ordered Marítima to pay Petrobras USD 350m.

In August 2015, EISA Petro Um SA filed a lawsuit in a Rio de Janeiro court against Petrobras subsidiary Transpetro, which rescind-ed three contracts with the shipbuilder that year, seeking BRL 384m in damages.

Synergy Aerospace aircraft purchases and leasing

Synergy Aerospace, the private holding company for Avianca Holdings and Avianca Brasil, purchases airplanes for lease and sale to its affiliated airlines. In 2016 it signed a purchase agreement for 62 Airbus A320neo planes, a deal reportedly worth over USD 6bn. The planes were described as being for OceanAir, which at the time had roughly 40 active aircraft. German Efromovich told Valor Econômico in September 2016 that the Synergy debt secured by Avianca shares was related to aircraft purchases. The purchase of planes for OceanAir came as larger rivals, including Gol and LATAM Brasil, were reducing capacity and in some cases selling planes. Kingland Holdings’ 2017 compliant against Synergy, Efromovich and Avianca Holdings claimed that Avianca was forced to bear the costs of Synergy’s allegedly “speculative aircraft orders”. The same week in October 2016 that OceanAir took delivery of its first Airbus A320neo, OceanAir and Synergy Aerospace were sued for USD 5m in relation to missed lease payments to aircraft lessor Avolon (owned by China’s HNA Group).

Some of Synergy Aerospace’s new A320neo aircraft – originally intended for OceanAir – will be delivered to Mexico’s Aeromar, aviation-news website Transponder 1200 cited Germán Efromovich as saying last week. Plans by Synergy Aerospace to acquire a 49% stake in Mexico’s Aeromar for up to USD 100m, announced in 2016, have so far failed to materialize. However, it reportedly plans to deliver three A320neo planes to Aeromar by end-2018 and eight in 2019. The aircraft deliveries are described as part of a deal that would lead to Aeromar’s rebranding as Avianca Mexico.

https://www.debtwire.com/intelligence/view/prime-2503215





Related-party transactions

Avianca Holdings has a substantial volume of related-party transactions with Efromovich-owned private companies (Figure 1). In 2017, Avianca reported USD 57m in payments to these companies, and nearly USD 30m in revenues from them (reflecting aircraft leased by Avianca to OceanAir). Minority shareholder Kingsland Holdings claimed in its February 2017 lawsuit that Germán and José Efromovich’s use of allegedly non-arm’s length related-party transaction amounted to “self-dealing”. The number of Efromovich companies with which Avianca reports related-party transactions has declined since the airline’s New York listing in 2013. However, recent airline reviews show that Avianca serves coffee produced by Colombian Mountain Cof-fee, which was listed until 2011 as a related party. The Colombian corporate registry still lists Germán Efromovich as a director of the company.

Restructuring of OceanAir/Synergy debt to Avianca Holdings: In 2009, Avianca provided working capital to OceanAir as part of an unexercised purchase option agreement. In December 2010, Avianca and OceanAir agreed to a restructuring of USD 60.7m in OceanAir debt guaranteed by Synergy Group, with repayments through 2013. The debt was restructured again in December 2011 and February 2012, extending payments through December 2014 and adding personal guarantees from the Efromovich brothers, according to Avianca disclosures and Kingsland’s complaint. OceanAir holding company SPSYN, which assumed the liability, repaid USD 17.2m in 2012, and in December 2013 Synergy transferred to Avianca real estate worth USD 15.9m. In December 2014, SPSYN failed to make a USD 22.6m payment, and in March 2015 Synergy Group committed to repaying the amount using dividends from Avianca in 2015 and 2016. Synergy repaid Avianca USD 11m in 2015, but received an extension on the USD 14.4m payment due 2016 until December 2017. According to Kingsland’s complaint, some of these extensions were granted “without cost or penalty and without providing basic information concerning the likelihood of further defaults”. Avianca’s 1Q18 financials showed roughly USD 14m in receivables from SPSYN, little changed from a year earlier. According to a motion to dismiss filed by Synergy in March 2017, Kingsland signed a settlement agreement in March 2015 unconditionally approving the restructuring.

Aircraft leases and purchases: Kingsland alleged that Synergy caused Avianca to lease unnecessary aircraft on unfavorable terms from Airbus, in exchange for Airbus agreeing to renegotiate debt owed to it by Synergy. The complaint also alleged that Avianca purchased unnecessary aircraft from Synergy, and that these leases and purchases caused Avianca to incur over USD 1bn in debt. Kingsland noted as well that Avianca allowed OceanAir and Avian to use its trademark without payment.

Ground transport: Kingsland cited Avianca Holdings’ contract with Synergy Group company Empresariales SAS, which provides ground transportation for Avianca employees, as another instance of irregular related-party transactions. According to the complaint, a 2015 internal audit found irregularities and instances of fraud in relation to transactions with Empresariales, but Avianca did not terminate the contract or investigate further. Avianca paid Empresariales USD 10.1m in 2017.

In 2017, Avianca Holdings also reported USD 3.4m in payments to Synergy’s Transportadora del Meta SAS, which provides ground cargo services, and USD 5.3m in payments to Efromovich’s Global Operadora Hotelera SA.

Other Efromovich-affiliated companies have also reported extensive related-party transactions with his private business. To-ronto-listed Pacific Rubiales Energy Corp (later renamed Pacific Exploration & Production, now Frontera Energy Corp), of which Germán Efromovich was a minority shareholder and director prior to its 2016 bankruptcy, reported USD 170m in trans-actions with Transportadora del Meta and USD 34m with Helicópteros Nacionales de Colombia SA between 2010 and 2014.



DEBTWIRE COVERAGE

05 Jun 2018 Avianca Holdings does not need capital injection - Efromovich (translated)

16 May 2018 Avianca negotiating delay in plane deliveries to reduce indebtedness (translated)

10 May 2018 Avianca: Advent analyzes options for LifeMiles stake - report

02 May 2018 Avianca, United close to reaching JV agreement - report

26 Apr 2018 Avianca Holdings merger with Avianca Brasil postponed for at least 18 months - (translated)

22 Mar 2018 Avianca starts appeals phase of disciplinary proceedings against 210 striking pilots (translated)

16 Mar 2018 Avianca outlook revised to stable

08 Mar 2018 Avianca fires 107 pilots in first stage of disciplinary proceedings (translated)

02 Mar 2018 Avianca has 'plan B' if United deal falls through - CEO (translated)

01 Mar 2018 Avianca updates 4Q17 adjusted operating income to USD 169.1m from USD 126.2m

27 Feb 2018 Avianca fires 20 pilots (translated)

26 Feb 2018 Avianca set to open sanctioning proceedings against striking pilots (translated)

14 Feb 2018 Avianca authorized by Supreme Court to fire unionized workers (translated)

27 Dec 2017 Avianca board yet to decide on investing in Argentina, Mexico

15 Dec 2017 Avianca challenges normative aspects of arbitration award on pilots’ strike

29 Nov 2017 Court: Avianca-Kingsland lawsuit discontinued

10 Nov 2017 Avianca pilots end strike, will resume work 13 November (translated)

03 Nov 2017 Avianca Brasil's shares frozen by Sao Paulo court (translated)

01 Nov 2017 Avianca's Brazilian merger hampered by court order to pay BRL 200m Estaleiro Ilha debt (translated)

25 Oct 2017 Avianca declines to meet with striking pilots (translated)

18 Oct 2017 Avianca agrees to invest in Servicios Aeroportuarios Integrados

16 Oct 2017 Avianca to open disciplinary proceedings against pilots who fail to return to work today (translated)

13 Oct 2017 Avianca acquisition of Aeroportuarios Integrados authorized by Colombian regulator

10 Mar 2017 Avianca capitalization proceeds to increase liquidity; eventual Argentina merger ‘probable’ – Efromovich

Disclaimer: We have obtained the information provided in this report in good faith from sources that we consider to be reliable, but we do not inde-pendently verify the information. The information is not intended to provide tax, legal or investment advice. We shall not be liable for any mistakes, errors, inaccuracies or omissions in, or incompleteness of, any information contained in this report. All such liability is excluded to the fullest extent permitted by law. Data has been derived from corporate disclosures, regulatory announcements, government publications, media reports, press releases, presentations and Debtwire intelligence.



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