Latham & Watkins Advises Grupo Aval on Future Flow Securitization of Credit Card Receivables

Multidisciplinary team led by members of the firm’s Latin America and Restructuring & Special Situations Practices represented the Colombian holding company.

March 10, 2022

A multidisciplinary team counseled Banco de Bogotá; Banco de Occidente S.A.; Banco de Bogotá, New York Agency; Banco de América Central S.A.; BAC International Bank, Inc.; and other entities of Grupo Aval in connection with a future flow securitization of credit card receivables of Taca International Airlines, S.A. (Taca), an airline company from the Avianca group. The securitization was entered into to refinance certain existing financing facilities of approximately US$140 million as the Avianca group emerges from its Chapter 11 process. Taca’s obligations as originator and servicer are guaranteed by Avianca Group International Limited.

The transaction involved an orphan special purpose vehicle incorporated in the Cayman Islands, which assumed all of the existing debt in exchange for certain credit card and other air travel receivables sold by Taca under a true sale structure. Of all the assumed debt, 90% will be payable through future cash flows generated by the sold receivables, while the remaining 10% will be payable in kind through the delivery of miles under a loyalty program from the Avianca group called LifeMiles. This is the first loan agreement of its kind in Latin America that provides payment in both cash and LifeMiles.

The future receivables, although assigned as part of the original financing, were challenged in Avianca’s bankruptcy proceedings to not be part of the lenders’ collateral post-bankruptcy. As a result, it was important for this transaction to be structured as a true sale under Salvadoran law to increase the likelihood that future receivables would continue to be owned by the orphan special purpose vehicle in the event of another bankruptcy.

Latham & Watkins LLP represented Grupo Aval in the transaction with a multidisciplinary team led by partners Gianluca Bacchiocchi, Tony Del Pino, and Adam Goldberg, with associates Giancarlo Reanda, Pedro Eraso, Asif Attarwala, and international visiting associate Javier Constanzo. Advice was also provided on tax matters by partner Elena Romanova, with associate Claire Park.

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