As Avianca weighs bids, hedge fund plays unusual role: Diplomat

Trouble was brewing this summer at Avianca Holdings, Latin America’s second-biggest airline. Tight on cash, the airline needed to raise money. For many on the board, one option was selling part of the company. The company’s largest investor — a swashbuckling, Bolivian-born entrepreneur, Germán Efromovich — had other ideas. The airline was the thread holding together the remnants of his once-powerful empire spanning oil and gas businesses, shipyards, hotels and airlines. He was not about to let it go without a fight. A number of suitors, including Delta, United and Copa Airlines of Panama, indicated interest in buying a stake — including buying out Efromovich and his brother, José — but the two made it known that they were not ready to relinquish control, people with knowledge of the negotiations said. Efromovich was often at odds with Avianca’s second-biggest shareholder, Roberto Kriete. Tensions in the boardroom were so high in recent months that there were shouting matches in some meetings. But there was a struggle on another front that would soon bring the parties together. Efromovich, after making big bets on the energy industry before oil prices plummeted, was on the brink of default on hundreds of millions of dollars in loans. The lender was Paul E. Singer and his hedge fund, Elliott Management, best known for its decade-long battle with Argentina over its defaulted debt. And some of the collateral was Efromovich’s stake in Avianca. That has brought Elliott’s executives to the negotiating table in recent months, meeting with Avianca’s suitors, participating in board meetings and keeping an eye on their borrower. Late last week, Delta, United and Copa submitted bids to partner with Avianca. Lengthy piece has full details.<br/>