Columbian flag carrier Avianca has announced the participation of the Republic of Colombia Government in its debtor-in-possession (DIP) financing.

The Ministerio de Hacienda y Credito Público (Finance Ministry), the management committee of the country’s Fondo de Mitigación de Emergencias (FOME, the Emergency Mitigation Fund) approved the participation.

Avianca said that as much as $370m has been committed in the proposed loan structure alongside private market investors.

In May this year, Avianca along with some of its subsidiaries and affiliates filed voluntary petitions in the US Bankruptcy Court for the Southern District of New York.

Avianca said: “We are pleased that the Government of the Republic of Colombia will participate in the company’s DIP financing and express our gratitude for the confidence and support this commitment demonstrates.

“As we previously disclosed on 13 August 2020, Avianca’s DIP loan financing is expected to consist of two tranches that include approximately $1.2bn of new funds as part of a $2.0bn overall financing facility (including rollups of existing debt and purchase consideration) which will allow the company to finance its operations during the pendency of its Chapter 11 reorganisation.

“In addition to the Colombian government committing to participate in the DIP loan -by providing approximately 30% of the new funds, or 20% of the total DIP financing- we are also very pleased with the positive reception the DIP loan structure has received from third-party institutional investors that, along with existing lenders, are expected to provide a substantial majority of the DIP loan financing.”